UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21157
---------------------
Nuveen Arizona Dividend Advantage Municipal Fund 3
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Jessica R. Droeger
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (312) 917-7700
-------------------
Date of fiscal year end: July 31
------------------
Date of reporting period: January 31, 2005
------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMIANNUAL REPORT January 31, 2005
Nuveen Investments
Municipal Closed-End
Exchange-Traded
Funds
NUVEEN ARIZONA PREMIUM INCOME MUNICIPAL FUND, INC.
NAZ
NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND
NFZ
NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND 2
NKR
NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND 3
NXE
NUVEEN TEXAS QUALITY INCOME MUNICIPAL FUND
NTX
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DEPENDABLE, TAX-FREE INCOME BECAUSE IT'S NOT WHAT YOU EARN, IT'S WHAT YOU
KEEP.(R)
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Photo: Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
Chairman's
LETTER TO SHAREHOLDERS
I am pleased to report that over the six-month period covered by this semiannual
report your Fund continued to provide you with monthly tax-free income and an
attractive total return. For more details about the management strategy and
performance of your Fund, please see the Portfolio Managers' Perspective and
Performance Overview sections of this report.
As I noted in my last letter to you, our conversations with financial advisors
and investors suggest that many of you may be wondering whether long-term
interest rates will soon begin to rise substantially, how high they might go,
and whether that makes this a good time to adjust your holdings of fixed-income
investments. We can't answer that question for you - no one knows what the
future will bring.
What we do know from our experience is that a well-balanced portfolio,
structured and carefully monitored with the help of a trusted investment
professional, can be an important component in helping you achieve your
long-term financial goals. In
"IN FACT, A WELL-DIVERSIFIED PORTFOLIO MAY ACTUALLY HELP TO REDUCE YOUR OVERALL
INVESTMENT RISK."
fact, a well-diversified portfolio may actually help to reduce your overall
investment risk. That is one reason why we believe that a municipal bond
investment like your Nuveen Fund can be an important building block in a
comprehensive investment program designed to perform well in a variety of market
conditions.
As in past reports, I urge you to consider receiving future Fund reports and
other Fund information by e-mail and the Internet . Not only will you be able to
receive the information faster, but this also may help lower your Fund's
expenses. Sign up is quick and easy - see the inside front cover of this report
for instructions.
At Nuveen Investments, our mission continues to be to assist you and your
financial advisor by offering investment services and products that can help you
to secure your financial objectives. We are grateful that you have chosen us as
a partner as you pursue your financial goals, and we look forward to continuing
to earn your trust in the months and years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
March 15, 2005
Nuveen Arizona and Texas Municipal Closed-End Exchange-Traded Funds
(NAZ, NFZ, NKR, NXE, NTX)
Portfolio Managers'
COMMENTS
Portfolio managers Scott Romans and Cathryn Steeves review key investment
strategies and the semiannual performance of these Funds. Scott, who joined
Nuveen in 2000, has managed the Arizona Funds (NAZ, NFZ, NKR and NXE) since
November 2003. Cathryn, who has been with Nuveen since 1996, assumed portfolio
management responsibility for NTX in August 2004.
WHAT KEY STRATEGIES WERE USED TO MANAGE THE ARIZONA AND TEXAS FUNDS DURING THE
SIX MONTHS ENDED JANUARY 31, 2005?
Between August 2004 and January 2005, the Federal Reserve introduced four one-
quarter-point increases in the fed funds rate, raising this short-term target
from 1.25% to 2.25%. (On February 2, 2005, following the end of this reporting
period, the Fed announced another 0.25% increase, bringing the fed funds rate to
2.50%.) With the market anticipating increases in interest rates throughout the
period, our focus centered on finding bonds that we believed could add immediate
value to the Funds' portfolios while also preserving their ability to perform
well under a variety of future market scenarios.
During this six-month period, municipal issuance in both Arizona and Texas
declined substantially from that of the previous six months. However, Texas
typically ranks among the nation's largest municipal issuers, and supply in
Arizona for 2004 as a whole exceeded that of the preceding year. As a result, we
continued to find attractive opportunities to make trades that we thought would
benefit the Funds.
In general, our purchase activities for all these Funds emphasized finding
premium bonds (those trading above their par value) with intermediate and
long-intermediate maturities - that is, bonds that matured in 20 to 25 years for
the Arizona Funds and in 15 to 23 years for NTX. In many cases, bonds in these
parts of the yield curve offered yields similar to those of longer-term bonds
with less inherent interest rate risk (the risk that the value of a Fund's
portfolio will decline if market interest rates rise, since bond prices move in
the opposite direction of interest rates).
4
Some of the additions to our portfolios during this period were financed with
the proceeds from sales of lower-rated holdings, as we took advantage of
opportunities to selectively trim some of our concentrated BBB and nonrated
positions. Because lower-rated bonds generally performed well over the past
year, demand for these bonds was strong and we were able to obtain attractive
prices for the bonds we sold. This process enabled us to reduce some of our more
concentrated credit positions. At the same time, we improved the Funds'
diversification by reinvesting the proceeds in other lower-rated and nonrated
credits when the market provided suitable opportunities.
Among the additions to some of the Arizona Funds during this period were
nonrated bonds issued by Estrella Mountain Ranch Community Facilities District
and securities rated BBB- issued by the Tucson Industrial Development Authority
(IDA) for the Agribusiness and Equine Center, a charter school. In NTX, in
addition to trimming concentrated credit positions, we also worked to reduce our
holdings of pre-refunded bonds, which tended to underperform in the interest
rate environment prevalent over the six-month period.
Another strategy designed to help us reduce interest rate risk is to hedge some
of our interest rate exposure in the derivatives markets. During this period, we
employed this strategy in NFZ, NKR and NXE. Our sole objective was to reduce
these Funds' durations (sensitivity to interest rate changes) without having a
negative impact on their income streams or common share dividends over the short
term. The costs of the hedges are reflected as additions or subtractions to the
Funds' net asset values (NAV) as the market values of the hedges fluctuate. The
hedges succeeded in reducing the volatility of the Funds' NAVs over the course
of this reporting period. At the same time, the hedges had negative market
values as of January 31, 2005, because long-term interest rates fell and bond
prices rose during most of the time the hedges were in place. Please note that
the hedges were put in place because the Funds' portfolio durations (and
therefore their interest rate-related price volatility) were greater than the
desired levels. This means that, although the hedges lost value because bond
prices in fact went up after the hedges were entered, the Funds'
longer-than-target portfolio durations resulted in interest rate-driven
increases in value that were greater than if the portfolio durations
5
had been at the target levels, and these excess interest rate-driven portfolio
returns roughly coincided with and offset the losses on the hedges.
HOW DID THE FUNDS PERFORM?
Individual results for the Arizona and Texas Funds, as well as for comparative
indexes, are presented in the accompanying table.
TOTAL RETURNS ON NET ASSET VALUE*
For periods ended 1/31/05
ARIZONA FUNDS 6-MONTH 1-YEAR 5-YEAR 10-YEAR
--------------------------------------------------------------------------------
NAZ 7.93% 8.55% 7.92% 7.11%
--------------------------------------------------------------------------------
NFZ 7.44% 7.51% NA NA
--------------------------------------------------------------------------------
NKR 8.25% 8.35% NA NA
--------------------------------------------------------------------------------
NXE 8.74% 8.84% NA NA
--------------------------------------------------------------------------------
TEXAS FUND
--------------------------------------------------------------------------------
NTX 7.03% 7.46% 9.47% 7.57%
--------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index1 4.80% 4.86% 7.50% 6.86%
--------------------------------------------------------------------------------
Lipper Other States
Municipal Debt Funds
Average2 12.14% 7.17% 11.32% 9.15%
--------------------------------------------------------------------------------
*Six-month returns are cumulative; returns for one year, five years, and ten
years are annualized.
Past performance is not predictive of future results. Returns do not reflect the
deduction of taxes that shareholders may have to pay on Fund distributions or
upon the sale of Fund shares.
For additional information, see the individual Performance Overview for your
Fund in this report.
For the six months ended January 31, 2005, the cumulative return on NAV for each
of the Arizona and Texas Funds outperformed the return on the Lehman Brothers
Municipal Bond Index. While these Funds underperformed the Lipper Other States
category for this period, it is important to note that the Lipper return
represents the overall average of returns for funds from 10 different states
exhibiting a variety of municipal market conditions. We believe this makes
direct comparisons between specific Funds and the Other States category average
less meaningful.
The primary factor benefiting the six-month performances of these Funds relative
to that of the unleveraged Lehman Brothers index was the Funds' use of financial
leverage. While leveraging can add volatility to the Funds' NAVs and share
prices, especially during periods when interest rates rise, this strategy also
can provide opportunities for
1 The Lehman Brothers Municipal Bond Index is an unleveraged, unmanaged
national index comprising a broad range of investment-grade municipal
bonds. Results for the Lehman indexes do not reflect any expenses.
2 The Lipper Other States Municipal Debt Funds category average is calculated
using the returns of all closed-end exchange-traded funds in this category
for each period as follows: 6 months, 44; 1 year, 44; 5 years, 19; and 10
years, 17. Fund and Lipper returns assume reinvestment of dividends.
6
additional income and total return for common shareholders when short-term
interest rates remain relatively low and long-term rates fall or remain fairly
constant, as they did during this reporting period.
In general, shorter-term municipal rates tended to rise during this six-month
period and longer-term rates tended to fall, causing a flattening of the
municipal yield curve. As a result, bonds with longer maturities or greater
sensitivity to interest rate movements generally tended to perform better than
bonds with shorter maturities or less interest rate sensitivity. This benefited
newer Funds like NKR and NXE, which were introduced in 2002, since they had less
exposure to the shorter end of the yield curve than the three older Funds. This
accounted for most of the performance differential between these Funds over the
six-month reporting period.
All of the Funds benefited from their holdings of lower quality bonds, which
generally outperformed other credit quality sectors as the economy improved. For
example, the top performing holding in both NAZ and NFZ during this reporting
period was a B- rated pollution control revenue bond issued by Coconino County
for Nevada Power Company. Bonds backed by the 1998 master tobacco settlement
agreement also were among the lower-rated credits that produced strong results
during this period as the litigation environment improved. As of January 31,
2005, NAZ, NXE and NTX held positions in tobacco bonds.
Among the sectors making positive contributions to the Funds' cumulative
six-month returns was healthcare, especially hospital bonds, which ranked second
in terms of performance among the Lehman municipal revenue sectors for the
period. The healthcare weighting in each of these Funds increased over this
six-month period.
Pre-refunded bonds tended to underperform during this reporting period, due
primarily to their shorter effective maturities. Older Funds typically have more
advance refunded bonds than the more recently introduced Funds. As of January
31, 2005, the two oldest Funds in this report--NAZ and NTX--had 9% and 7%,
respectively, of their portfolios pre-refunded, although NFZ, which was
introduced in 2001, held 8% in pre-refunded bonds. These holdings served as a
mild constraint on the performances of these Funds during this period. By
comparison, NKR held 2% of its portfolio in pre-refunded bonds, while NXE had
less than 1% as of the end of the period.
7
HOW WERE THE FUNDS POSITIONED IN TERMS OF CREDIT QUALITY AND BOND CALLS AS OF
JANUARY 31, 2005?
We continued to believe that, given the current geopolitical and economic
climate, maintaining strong credit quality was an important requirement. As of
January 31, 2005, all five of these Funds continued to offer excellent credit
quality, with allocations of bonds rated AAA/U.S. guaranteed and AA among the
Arizona Funds ranging from 73% in NFZ to 78% in NKR and NXE to 82% in NAZ, while
NTX had 78% of its portfolio allocated to bonds rated AAA/U.S. guaranteed and
AA.
On January 31, 2005, potential call exposure for the period 2005 through 2007
ranged from zero in NXE and 1% in NKR to 7% in NAZ, 9% in NTX and 10% in NFZ.
The number of actual bond calls in all of these Funds depends largely on future
market interest rates.
8
Dividend and Share Price
INFORMATION
As short-term interest rates remained relatively low throughout this reporting
period, the leveraged structures of these five Funds continued to support their
dividend-paying capabilities. The extent of this benefit is tied in part to the
short-term rates these Funds pay their MuniPreferred(R) shareholders. During
periods of low short-term rates, leveraged Funds generally pay lower dividends
to their MuniPreferred shareholders, which can leave more earnings to support
common share dividends. This strategy helped to maintain the dividends of NFZ,
NKR, NXE and NTX throughout the reporting period. NAZ, which was introduced in
1992, saw some of its older, higher-yielding holdings retired or called, and the
resulting reduction in income caused by reinvesting the assets at today's lower
rates led to two dividend cuts in that Fund during the course of this reporting
period.
In addition, due to capital gains generated by normal portfolio activity, common
shareholders of NFZ and NKR received capital gains distributions of $0.0436 and
$0.1191 per share, respectively, at the end of December 2004.
All of these Funds seek to pay stable dividends at rates that reflect each
Fund's past results and projected future performance. During certain periods,
each Fund may pay dividends at a rate that may be more or less than the amount
of net investment income actually earned by the Fund during the period. If a
Fund has cumulatively earned more than it has paid in dividends, it holds the
excess in reserve as undistributed net investment income (UNII) as part of the
Fund's NAV. Conversely, if a Fund has cumulatively paid dividends in excess of
its earnings, the excess constitutes negative UNII that is likewise reflected in
the Fund's NAV. Each Fund will, over time, pay all of its net investment income
as dividends to shareholders. As of January 31, 2005, all of the Funds in this
report had positive UNII balances for both financial statement and tax purposes.
9
At the end of the reporting period, the Funds' share prices were trading at
premiums and discounts to their NAVs as shown in the accompanying chart:
FUND 1/31 PREM/DISC PERIOD AVG. PREM/DISC
--------------------------------------------------------------------------------
NAZ 7.62% 10.22%
--------------------------------------------------------------------------------
NFZ 6.41% 2.62%
--------------------------------------------------------------------------------
NKR 0.44% - 0.01%
--------------------------------------------------------------------------------
NXE - 0.94% - 2.62%
--------------------------------------------------------------------------------
NTX - 2.68% - 1.88%
--------------------------------------------------------------------------------
10
Nuveen Arizona Premium Income Municipal Fund, Inc.
NAZ
Performance
OVERVIEW As of January 31, 2005
Pie Chart:
CREDIT QUALITY
(as a % of total investments)
AAA/U.S. Guaranteed 69%
AA 13%
A 5%
BBB 9%
NR 1%
BB or Lower 3%
Bar Chart:
2004-2005 MONTHLY TAX-FREE DIVIDENDS PER SHARE
Feb 0.0765
Mar 0.0765
Apr 0.0765
May 0.0765
Jun 0.0765
Jul 0.0765
Aug 0.0765
Sep 0.074
Oct 0.074
Nov 0.074
Dec 0.071
Jan 0.071
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
2/1/04 16.55
16.22
16.31
16.36
16.75
16.75
17
16.97
16.85
16.96
16.72
16.84
16.77
16.75
16.75
16.9
16.76
16.8
16.72
16.72
16.74
16.7
16.8
16.7
16.99
16.75
16.83
16.88
16.93
16.96
16.93
16.9
17.02
16.99
16.94
17.05
17.19
17.2
17.22
17.25
17.19
17.19
17.2
17.4
17.13
17.15
17.1
17.05
16.95
17.15
16.55
16.82
16.76
16.73
16.65
16.62
16.3
16.16
16
15.67
15.57
15.56
15.58
15.56
15.7
15.71
15.6
15.55
15.52
15.03
14.93
14.8
14.8
14.81
14.75
14.68
14.77
14.6
14.65
14.7
14.74
14.68
15
15
15
14.82
14.77
14.76
14.7
14.84
14.79
14.6
14.56
14.44
14.5
14.5
14.54
14.54
14.47
14.47
14.52
14.45
14.52
14.49
14.45
14.49
14.63
15.1
15.03
15.09
15.27
15.35
15.25
15.22
15.15
15.2
15.31
15.36
15.36
15.21
15.26
15.21
15.14
14.93
15.04
15.14
15.27
15.27
15.17
15.3
15.5
15.54
15.95
15.93
15.94
15.77
15.73
15.71
15.85
15.87
15.81
16
16.06
15.96
16.22
16.17
16.22
16.32
16.4
16.46
16.29
16.25
16.2
16.45
16.22
16.25
16.44
16.23
16.14
16.14
16.47
16.49
16.59
16.66
16.8
16.52
16.7
16.79
16.72
16.71
16.61
16.6
16.56
16.65
16.75
16.67
16.75
16.55
16.6
16.56
16.5
16.51
16.5
16.44
16.42
16.47
16.61
16.53
16.4
16.39
16.39
16.28
16.28
16.22
16.29
16.12
16.05
15.72
15.62
15.42
15.53
15.71
15.78
15.82
15.6
15.77
15.77
15.58
15.6
15.64
15.68
15.69
15.46
15.41
15.37
15.35
15.61
15.55
15.46
15.47
15.4
15.4
15.33
15.37
15.46
15.32
15.33
15.335
15.4
15.33
15.32
15.29
15.29
15.31
15.17
15.21
15.27
15.27
15.33
15.31
15.45
15.37
15.27
15.22
15.22
15.21
15.21
15.35
15.49
15.62
15.61
15.52
15.6
15.71
15.66
1/31/05 15.82
FUND SNAPSHOT
------------------------------------
Share Price $15.82
------------------------------------
Common Share
Net Asset Value $14.70
------------------------------------
Premium/(Discount) to NAV 7.62%
------------------------------------
Market Yield 5.39%
------------------------------------
Taxable-Equivalent Yield1 7.87%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $65,491
------------------------------------
Average Effective
Maturity (Years) 16.90
------------------------------------
Leverage-Adjusted Duration 8.65
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 11/19/92)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month 6.50% 7.93%
(Cumulative)
------------------------------------
1-Year 2.92% 8.55%
------------------------------------
5-Year 8.27% 7.92%
------------------------------------
10-Year 7.73% 7.11%
------------------------------------
SECTORS
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 35.2%
------------------------------------
Water and Sewer 14.1%
------------------------------------
Healthcare 13.3%
------------------------------------
U.S. Guaranteed 12.2%
------------------------------------
Utilities 7.2%
------------------------------------
Education and Civic
Organizations 6.5%
------------------------------------
Housing/Multifamily 5.9%
------------------------------------
Other 5.6%
------------------------------------
1 Taxable-equivalent yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 31.5%. For investments that generate qualified dividend income, the
taxable-equivalent yield is lower.
11
Nuveen Arizona Dividend Advantage Municipal Fund
NFZ
Performance
OVERVIEW As of January 31, 2005
Pie Chart:
CREDIT QUALITY
(as a % of total investments)
AAA/U.S. Guaranteed 53%
AA 20%
A 11%
BBB 14%
NR 1%
BB or Lower 1%
Bar Chart:
2004-2005 MONTHLY TAX-FREE DIVIDENDS PER SHARE2
Feb 0.0765
Mar 0.0765
Apr 0.0765
May 0.0765
Jun 0.0765
Jul 0.0765
Aug 0.0765
Sep 0.0765
Oct 0.0765
Nov 0.0765
Dec 0.0765
Jan 0.0765
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
2/1/04 17.17
16.99
16.8
16.89
16.9
16.9
16.88
16.71
16.71
16.71
16.71
16.89
16.9
16.9
16.75
16.85
16.62
16.67
16.7
16.7
16.7
16.75
16.7
16.75
16.8
16.8
16.71
16.85
16.85
16.85
16.67
16.82
16.65
16.81
16.81
16.81
16.88
16.85
16.95
16.88
16.88
16.79
16.9
16.8
16.7
16.4
16.18
15.92
15.8
15.85
15.5
15.4
15.45
15.3
15.4
15.12
14.95
14.7
14.65
14.83
14.84
14.61
14.61
14.66
14.6
14.65
14.65
14.57
14.3
14.03
14.2
13.95
13.65
13.78
13.8
13.86
13.91
13.69
13.69
13.84
13.85
13.92
14.14
14.12
14.12
13.98
14
14.3
14.28
14.32
14.22
14.34
14.31
13.6
13.79
13.64
13.65
13.64
13.75
13.81
13.81
13.76
13.98
13.93
13.87
13.9
13.9
14.45
14.55
14.65
14.75
14.67
15.05
15.08
15.25
15.24
15.28
15.3
15.2
15.1
15.05
15.05
15.1
14.9
15.15
15.25
15.4
15.4
15.4
15.25
15.15
15.15
15.26
15.46
15.7
15.39
15.4
15.4
15.8
15.8
15.9
16.1
16.06
15.6
15.85
15.75
15.85
16
16
16.05
16.02
16
15.98
15.98
15.92
15.73
15.8
15.9
15.77
15.65
15.51
15.42
15.45
15.54
15.58
15.45
15.46
15.75
15.62
15.7
15.74
15.75
15.63
15.63
15.73
15.66
15.85
15.88
15.88
16.06
16.35
16.4
16.4
16.4
16.4
16.25
16.1
16.1
15.85
15.86
15.85
15.7
15.7
15.89
15.85
15.85
16
15.75
15.59
15.55
15.5
15.33
15.4
15.6
15.7
15.78
15.74
15.64
15.74
15.92
15.8
15.8
15.8
15.42
15.36
15.29
15.58
15.58
15.49
15.44
15.44
15.45
15.34
15.46
15.47
15.47
15.28
15.28
15.38
15.47
15.56
15.87
15.7
15.67
15.67
15.65
15.76
15.65
15.75
16.2
16.13
16.13
16.65
16.65
16.8
16.65
16.74
16.74
16.74
16.75
16.75
16.75
16.75
16.7
16.7
1/31/05 16.6
FUND SNAPSHOT
------------------------------------
Share Price $16.60
------------------------------------
Common Share
Net Asset Value $15.60
------------------------------------
Premium/(Discount) to NAV 6.41%
------------------------------------
Market Yield 5.53%
------------------------------------
Taxable-Equivalent Yield1 8.07%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $24,100
------------------------------------
Average Effective
Maturity (Years) 16.71
------------------------------------
Leverage-Adjusted Duration 7.97
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 1/30/01)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month 11.25% 7.44%
(Cumulative)
------------------------------------
1-Year 2.84% 7.51%
------------------------------------
Since
Inception 8.65% 8.45%
------------------------------------
SECTORS
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 41.3%
------------------------------------
Utilities 14.9%
------------------------------------
Housing/Multifamily 10.7%
------------------------------------
Healthcare 8.1%
------------------------------------
U.S. Guaranteed 7.9%
------------------------------------
Education and Civic
Organizations 6.7%
------------------------------------
Water and Sewer 5.1%
------------------------------------
Other 5.3%
------------------------------------
1 Taxable-equivalent yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 31.5%. For investments that generate qualified dividend income, the
taxable-equivalent yield is lower.
2 The Fund also paid shareholders a capital gains distribution in December
2004 of $0.0436 per share.
12
Nuveen Arizona Dividend Advantage Municipal Fund 2
NKR
Performance
OVERVIEW As of January 31, 2005
Pie Chart:
CREDIT QUALITY
(as a % of total investments)
AAA/U.S. Guaranteed 67%
AA 11%
A 11%
BBB 9%
NR 1%
BB or Lower 1%
Bar Chart:
2004-2005 MONTHLY TAX-FREE DIVIDENDS PER SHARE2
Feb 0.072
Mar 0.072
Apr 0.072
May 0.072
Jun 0.072
Jul 0.072
Aug 0.072
Sep 0.072
Oct 0.072
Nov 0.072
Dec 0.072
Jan 0.072
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
2/1/04 14.86
15.07
15.05
15.2
15.31
15.26
15.15
15.12
15.13
15.12
15.13
15.34
15.36
15.18
15.1
15.15
15.15
15.15
15.15
15.15
15.1
15.24
15.3
15.35
15.44
15.4
15.45
15.66
15.46
15.55
15.71
15.79
15.6
15.51
15.77
15.75
15.73
15.61
15.76
15.71
15.69
15.69
15.91
15.95
15.7
15.6
15.44
15.42
15.45
15.3
15.2
15.17
14.83
15.08
15.02
14.9
14.65
14.65
14.55
14.45
14.56
14.5
14.53
14.6
14.64
14.64
14.62
14.65
14.64
14.3
14.64
14.19
14.19
14.23
14.22
14.35
14.35
14.35
14.41
14.36
14.35
14.58
14.58
14.6
14.6
14.5
14.47
14.42
14.51
14.37
14.36
14.14
14.05
13.93
14.01
13.82
13.99
14.01
14.05
14.05
13.92
14.01
14.1
14.25
14.6
14.69
14.64
14.8
14.83
14.95
14.98
14.98
15
14.82
14.82
14.82
14.82
14.68
14.68
14.68
14.6
14.6
14.9
14.8
14.66
14.66
14.82
14.82
14.98
14.86
15.05
14.96
15.02
15.24
15.15
15.13
15.14
15.15
15.18
15.22
15.188
15.21
15.05
15.07
15.1
15.1
15.2
15.16
15.19
15.29
15.23
15.39
15.33
15.5
15.35
15.5
15.4
15.48
15.48
15.48
15.5
15.35
15.65
15.64
15.55
15.42
15.55
15.62
15.7
15.68
15.5
15.5
15.5
15.5
15.47
15.47
15.5
15.5
15.46
15.46
15.46
15.46
15.54
15.53
15.8
15.49
15.34
15.49
15.54
15.53
15.54
15.77
15.77
15.78
15.84
15.61
15.62
15.07
15.07
15.3
15.3
15.35
15.43
15.55
15.66
15.66
15.66
15.75
15.78
16
16.15
16.15
16.14
15.81
15.81
15.73
15.77
15.77
15.78
15.75
15.68
15.7
15.44
15.42
15.48
15.54
15.4
15.41
15.5
15.69
15.59
15.59
15.75
15.8
15.8
15.76
16
16
15.9
15.92
16.1
16.22
16.2
16.84
16.95
16.67
16.47
16.12
15.95
15.84
15.8
15.9
15.92
15.96
16.07
1/31/05 15.85
FUND SNAPSHOT
------------------------------------
Share Price $15.85
------------------------------------
Common Share
Net Asset Value $15.78
------------------------------------
Premium/(Discount) to NAV 0.44%
------------------------------------
Market Yield 5.45%
------------------------------------
Taxable-Equivalent Yield1 7.96%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $38,232
------------------------------------
Average Effective
Maturity (Years) 16.56
------------------------------------
Leverage-Adjusted Duration 7.76
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 3/25/02)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month 10.76% 8.25%
(Cumulative)
------------------------------------
1-Year 13.23% 8.35%
------------------------------------
Since
Inception 8.11% 9.62%
------------------------------------
SECTORS
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 30.9%
------------------------------------
Tax Obligation/General 26.1%
------------------------------------
Healthcare 12.6%
------------------------------------
Education and Civic
Organizations 7.0%
------------------------------------
Water and Sewer 5.8%
------------------------------------
Housing/Multifamily 5.3%
------------------------------------
Utilities 4.8%
------------------------------------
Other 7.5%
------------------------------------
1 Taxable-equivalent yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 31.5%. For investments that generate qualified dividend income, the
taxable-equivalent yield is lower.
2 The Fund also paid shareholders a capital gains distribution in December
2004 of $0.1191 per share.
13
Nuveen Arizona Dividend Advantage Municipal Fund 3
NXE
Performance
OVERVIEW As of January 31, 2005
Pie Chart:
CREDIT QUALITY
(as a % of total investments)
AAA/U.S. Guaranteed 63%
AA 15%
A 7%
BBB 12%
NR 1%
BB or Lower 2%
Bar Chart:
2004-2005 MONTHLY TAX-FREE DIVIDENDS PER SHARE
Feb 0.067
Mar 0.067
Apr 0.067
May 0.067
Jun 0.067
Jul 0.067
Aug 0.067
Sep 0.067
Oct 0.067
Nov 0.067
Dec 0.067
Jan 0.067
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
2/1/04 14.25
14
14.02
14.32
14.15
14.25
14.2
14.09
14.05
14.05
14.18
14.15
14.25
14.28
14.01
14.1
14.13
14.13
14.23
14.23
14.35
14.51
14.4
14.44
14.46
14.77
14.69
14.69
14.35
14.3
14.45
14.4
14.43
14.38
14.55
14.7
14.74
14.58
14.58
14.77
14.76
14.76
14.85
14.88
14.7
14.6
14.41
14.55
14.58
14.5
14.3
14.15
13.82
13.71
13.87
13.95
13.87
13.75
13.76
13.68
13.65
13.65
13.61
13.3
13.35
13.4
13.19
13.25
12.89
12.34
12.4
12.35
12.3
12.39
12.39
12.34
12.28
12.28
12.43
12.6
12.77
12.6
12.76
12.78
12.78
12.62
12.75
12.8
12.7
12.76
12.8
13.11
13
12.54
12.56
12.54
12.55
12.55
12.75
12.79
12.58
12.65
12.75
12.84
12.95
12.93
12.9
13.25
13.15
13.25
13.29
13.38
13.42
13.32
13.39
13.35
13.49
13.5
13.61
13.5
13.58
13.35
13.35
13.268
13.35
13.3
13.3
13.3
13.18
13.36
13.7
13.74
13.79
13.78
13.79
13.76
13.6
13.65
13.65
13.65
13.67
13.56
13.6
13.6
13.65
13.61
13.71
13.72
13.9
13.9
13.85
13.66
13.68
13.65
13.65
13.65
13.72
13.64
13.98
14.15
14.05
13.9
13.92
14.21
14.28
14.23
14.16
14.29
14.2
14.1
14.08
14
14.01
14.01
14.09
13.85
14.11
14.11
14.21
14.15
14.21
14.41
14.47
14.42
14.49
14.54
14.55
14.6
14.5
14.5
14.47
14.4
14.4
14.45
14.45
14.61
14.66
14.66
14.35
14.18
14.05
14.2
14.23
14.04
14.18
14.16
14.04
13.89
14.07
14.04
14.25
14.26
14.07
13.99
14.02
14.05
14.15
14.15
14.03
14.2
14.14
14.15
14.08
14.01
14.15
13.97
13.95
13.9
13.97
14.04
14.06
14.06
13.98
14.04
14.08
14.14
14.14
14.18
14.2
14.22
14.29
14.35
14.33
14.49
14.35
14.4
14.55
14.6
14.65
14.5
14.5
14.54
14.59
14.66
14.71
1/31/05 14.68
FUND SNAPSHOT
------------------------------------
Share Price $14.68
------------------------------------
Common Share
Net Asset Value $14.82
------------------------------------
Premium/(Discount) to NAV -0.94%
------------------------------------
Market Yield 5.48%
------------------------------------
Taxable-Equivalent Yield1 8.00%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $45,456
------------------------------------
Average Effective
Maturity (Years) 18.10
------------------------------------
Leverage-Adjusted Duration 7.46
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 9/25/02)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month 13.54% 8.74%
(Cumulative)
------------------------------------
1-Year 10.30% 8.84%
------------------------------------
Since
Inception 4.74% 7.07%
------------------------------------
SECTORS
(as a % of total investments)
------------------------------------
Tax Obligation/Limited 27.5%
------------------------------------
Tax Obligation/General 15.9%
------------------------------------
Healthcare 14.7%
------------------------------------
Education and Civic
Organizations 10.6%
------------------------------------
Transportation 9.1%
------------------------------------
Housing/Multifamily 7.1%
------------------------------------
Water and Sewer 6.6%
------------------------------------
Other 8.5%
------------------------------------
1 Taxable-equivalent yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a combined federal and state income tax
rate of 31.5%. For investments that generate qualified dividend income, the
taxable-equivalent yield is lower.
14
Nuveen Texas Quality Income Municipal Fund
NTX
Performance
OVERVIEW As of January 31, 2005
Pie Chart:
CREDIT QUALITY
(as a % of total investments)
AAA/U.S. Guaranteed 64%
AA 14%
A 9%
BBB 12%
BB or Lower 1%
Bar Chart:
2004-2005 MONTHLY TAX-FREE DIVIDENDS PER SHARE
Feb 0.08
Mar 0.08
Apr 0.08
May 0.08
Jun 0.08
Jul 0.08
Aug 0.08
Sep 0.08
Oct 0.08
Nov 0.08
Dec 0.08
Jan 0.08
Line Chart:
SHARE PRICE PERFORMANCE
Weekly Closing Price
Past performance is not predictive of future results.
2/1/04 15.1
15.23
15.23
15.11
15.22
15.15
15.26
15.2
15.25
15.29
15.59
15.7
15.58
15.55
15.48
15.41
15.45
15.42
15.5
15.5
15.66
15.8
15.8
15.84
15.91
16.03
15.83
15.64
15.71
15.66
15.6
15.52
15.64
15.7
15.8
15.78
15.66
15.7
15.7
15.7
15.7
15.65
15.65
15.71
15.5
15.05
14.65
14.91
14.85
14.94
14.84
14.57
14.2
14.49
14.25
14.23
14.13
13.8
13.7
13.56
13.65
13.53
13.58
13.68
13.72
13.73
13.7
13.55
13.23
12.93
13.15
13.27
13.25
13.36
13.46
13.21
13.52
13.51
13.37
13.35
13.62
13.63
13.94
13.87
13.87
13.86
14.01
14.2
14.19
14.16
14.13
14.15
14.1
13.9
13.99
13.88
13.94
14.11
14
14.024
14.024
14.12
13.96
14
13.92
13.95
13.97
14.15
14.25
14.4
14.35
14.3
14.4
14.24
14.24
14.17
14.21
14.25
14.25
14.2
14.27
14.2
14.3
14.16
14.39
14.4
14.59
14.59
14.4
14.5
14.56
14.51
14.76
14.85
14.85
14.5
14.48
14.61
14.58
14.65
14.6
14.65
14.65
14.75
14.77
14.97
14.96
15
15
15.05
15.07
15.1
15.12
15.11
15.17
15.3
15.13
15.1
15.12
15.13
15.2
15.1
15.07
14.97
15.12
15.05
15.15
15.26
15.38
15.14
14.99
14.99
14.98
15
15.01
15.09
15.24
15.25
15.31
15.47
15.7
15.49
15.5
15.55
15.47
15.46
15.46
15.31
15.52
15.52
15.52
15.56
15.56
15.6
15.67
15.7
15.71
15.4
15.2
15.3
15.36
15.25
15.44
15.62
15.75
15.78
15.81
15.52
15.56
15.52
15.53
15.63
15.63
15.54
15.6
15.5
15.59
15.58
15.43
15.45
15.4
15.39
15.31
15.2
15.15
15.134
15.05
14.99
14.98
14.86
14.91
14.8
14.87
14.93
14.92
15.01
15.06
15.08
15.15
15.19
15.11
15.15
15.19
15.02
15.08
15.02
15.09
15.14
15.14
15.25
15.27
15.22
15.19
15.26
15.21
1/31/05 15.27
FUND SNAPSHOT
------------------------------------
Share Price $15.27
------------------------------------
Common Share
Net Asset Value $15.69
------------------------------------
Premium/(Discount) to NAV -2.68%
------------------------------------
Market Yield 6.29%
------------------------------------
Taxable-Equivalent Yield1 8.74%
------------------------------------
Net Assets Applicable to
Common Shares ($000) $148,672
------------------------------------
Average Effective
Maturity (Years) 18.14
------------------------------------
Leverage-Adjusted Duration 7.98
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Inception 10/17/91)
------------------------------------
ON SHARE PRICE ON NAV
------------------------------------
6-Month 7.99% 7.03%
(Cumulative)
------------------------------------
1-Year 7.47% 7.46%
------------------------------------
5-Year 11.63% 9.47%
------------------------------------
10-Year 7.93% 7.57%
------------------------------------
SECTORS
(as a % of total investments)
------------------------------------
Tax Obligation/General 21.8%
------------------------------------
Healthcare 16.6%
------------------------------------
Tax Obligation/Limited 9.7%
------------------------------------
Education and Civic
Organizations 8.7%
------------------------------------
U.S. Guaranteed 7.7%
------------------------------------
Water and Sewer 7.5%
------------------------------------
Housing/Multifamily 5.7%
------------------------------------
Utilities 5.7%
------------------------------------
Long-Term Care 5.0%
------------------------------------
Other 11.6%
------------------------------------
1 Taxable-equivalent yield represents the yield that must be earned on a
fully taxable investment in order to equal the yield of the Fund on an
after-tax basis. It is based on a federal income tax rate of 28%. For
investments that generate qualified dividend income, the taxable-equivalent
yield is lower.
15
Shareholder
MEETING REPORT
The Shareholder Meeting was held in San Francisco, California, on November 17,
2004.
NAZ NFZ NKR
------------------------------------------------------------------------------------------------------------------------------------
APPROVAL OF THE BOARD MEMBERS
WAS REACHED AS FOLLOWS:
Common and Common and Common and
MuniPreferred MuniPreferred MuniPreferred MuniPreferred MuniPreferred MuniPreferred
shares voting shares voting shares voting shares voting shares voting shares voting
together together together together together together
as a class as a class as a class as a class as a class as a class
====================================================================================================================================
Robert P. Bremner
For 4,192,096 -- 1,531,590 -- 2,399,663 --
Withhold 19,677 -- 2,105 -- 4,140 --
------------------------------------------------------------------------------------------------------------------------------------
Total 4,211,773 -- 1,533,695 -- 2,403,803 --
====================================================================================================================================
Lawrence H. Brown
For 4,191,599 -- 1,531,590 -- 2,396,663 --
Withhold 20,174 -- 2,105 -- 7,140 --
------------------------------------------------------------------------------------------------------------------------------------
Total 4,211,773 -- 1,533,695 -- 2,403,803 --
====================================================================================================================================
Jack B. Evans
For 4,183,638 -- 1,526,690 -- 2,395,187 --
Withhold 28,135 -- 7,005 -- 8,616 --
------------------------------------------------------------------------------------------------------------------------------------
Total 4,211,773 -- 1,533,695 -- 2,403,803 --
====================================================================================================================================
William C. Hunter
For 4,183,638 -- 1,526,690 -- 2,395,187 --
Withhold 28,135 -- 7,005 -- 8,616 --
------------------------------------------------------------------------------------------------------------------------------------
Total 4,211,773 -- 1,533,695 -- 2,403,803 --
====================================================================================================================================
William J. Schneider
For -- 1,018 -- 470 -- 732
Withhold -- 4 -- 5 -- --
------------------------------------------------------------------------------------------------------------------------------------
Total -- 1,022 -- 475 -- 732
====================================================================================================================================
Timothy R. Schwertfeger
For -- 1,018 -- 470 -- 732
Withhold -- 4 -- 5 -- --
------------------------------------------------------------------------------------------------------------------------------------
Total -- 1,022 -- 475 -- 732
====================================================================================================================================
Judith M. Stockdale
For 4,183,638 -- 1,526,690 -- 2,395,187 --
Withhold 28,135 -- 7,005 -- 8,616 --
------------------------------------------------------------------------------------------------------------------------------------
Total 4,211,773 -- 1,533,695 -- 2,403,803 --
====================================================================================================================================
16
NXE NTX
------------------------------------------------------------------------------------------------------------------------------------
APPROVAL OF THE BOARD MEMBERS
WAS REACHED AS FOLLOWS:
Common and Common and
MuniPreferred MuniPreferred MuniPreferred MuniPreferred
shares voting shares voting shares voting shares voting
together together together together
as a class as a class as a class as a class
====================================================================================================================================
Robert P. Bremner
For 3,036,999 -- 8,375,936 --
Withhold 8,978 -- 61,617 --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,045,977 -- 8,437,553 --
====================================================================================================================================
Lawrence H. Brown
For 3,036,999 -- 8,374,101 --
Withhold 8,978 -- 63,452 --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,045,977 -- 8,437,553 --
====================================================================================================================================
Jack B. Evans
For 3,029,299 -- 8,375,136 --
Withhold 16,678 -- 62,417 --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,045,977 -- 8,437,553 --
====================================================================================================================================
William C. Hunter
For 3,034,811 -- 8,375,936 --
Withhold 11,166 -- 61,617 --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,045,977 -- 8,437,553 --
====================================================================================================================================
William J. Schneider
For -- 866 -- 2,435
Withhold -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total -- 866 -- 2,435
====================================================================================================================================
Timothy R. Schwertfeger
For -- 866 -- 2,435
Withhold -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Total -- 866 -- 2,435
====================================================================================================================================
Judith M. Stockdale
For 3,031,811 -- 8,374,801 --
Withhold 14,166 -- 62,752 --
------------------------------------------------------------------------------------------------------------------------------------
Total 3,045,977 -- 8,437,553 --
====================================================================================================================================
17
Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ)
Portfolio of
INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 1.4% (1.0% OF TOTAL INVESTMENTS)
$ 940 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 918,540
Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 9.4% (6.5% OF TOTAL INVESTMENTS)
1,000 Arizona State University, Certificates of Participation, 7/12 at 100.00 AAA 1,115,980
Series 2002, 5.375%, 7/01/19 - MBIA Insured
1,000 Arizona State University, System Revenue Bonds, Series 2002, 7/12 at 100.00 AAA 1,066,240
5.000%, 7/01/25 - FGIC Insured
1,250 Glendale Industrial Development Authority, Arizona, Revenue 5/11 at 101.00 A- 1,342,987
Bonds, Midwestern University, Series 2001A, 5.875%, 5/15/31
1,050 Northern Arizona University, System Revenue Bonds, 6/12 at 100.00 AAA 1,088,724
Series 2002, 5.000%, 6/01/34 - FGIC Insured
1,500 Tempe Industrial Development Authority, Arizona, Lease 7/13 at 100.00 AAA 1,565,370
Revenue Bonds, Arizona State University Foundation Project,
Series 2003, 5.000%, 7/01/34 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 19.3% (13.3% OF TOTAL INVESTMENTS)
2,000 Arizona Health Facilities Authority, Hospital System Revenue 11/09 at 100.00 Ba2 2,026,620
Bonds, Phoenix Children's Hospital, Series 1999A,
6.125%, 11/15/22
1,000 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB 1,125,700
Bonds, John C. Lincoln Health Network, Series 2000,
7.000%, 12/01/25
800 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 BBB+ 897,608
Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20
2,150 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 BBB+ 2,263,499
Health Facility Revenue Bonds, Catholic Healthcare West,
Series 2004A, 5.375%, 7/01/23
3,000 Mesa Industrial Development Authority, Arizona, Revenue 1/10 at 101.00 AAA 3,329,100
Bonds, Discovery Health System, Series 1999A,
5.750%, 1/01/25 - MBIA Insured
515 Puerto Rico Industrial, Tourist, Educational, Medical and 11/10 at 101.00 AA 582,934
Environmental Control Facilities Financing Authority,
Hospital Revenue Bonds, Hospital de la Concepcion,
Series 2000A, 6.375%, 11/15/15
1,500 Scottsdale Industrial Development Authority, Arizona, 12/11 at 101.00 A3 1,617,885
Hospital Revenue Bonds, Scottsdale Healthcare,
Series 2001, 5.800%, 12/01/31
1,055 Winslow Industrial Development Authority, Arizona, Hospital 6/08 at 101.00 N/R 813,595
Revenue Bonds, Winslow Memorial Hospital Project,
Series 1998, 5.500%, 6/01/22
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 8.5% (5.9% OF TOTAL INVESTMENTS)
400 Phoenix Industrial Development Authority, Arizona, GNMA 6/11 at 102.00 Aaa 422,300
Collateralized Multifamily Housing Revenue Bonds,
Campaigne Place on Jackson, Series 2001, 5.700%, 6/20/31
(Alternative Minimum Tax)
530 Phoenix Industrial Development Authority, Arizona, GNMA 4/15 at 100.00 Aaa 532,523
Collateralized Multifamily Housing Revenue Bonds, Park Lee
Apartments, Series 2004A, 5.050%, 10/20/44 (Alternative
Minimum Tax)
1,000 Phoenix Industrial Development Authority, Arizona, GNMA 9/10 at 103.00 Aaa 1,084,930
Collateralized Mortgage Loan Multifamily Housing Revenue
Bonds, Camelback Crossings Apartments Project,
Series 2000, 6.350%, 9/20/35
3,215 Tucson Industrial Development Authority, Arizona, Senior 7/10 at 101.00 AA 3,523,447
Living Facilities Revenue Bonds, Christian Care Project,
Series 2000A, 5.625%, 7/01/20 - RAAI Insured
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 0.1% (0.0% OF TOTAL INVESTMENTS)
40 Phoenix Industrial Development Authority, Arizona, Statewide 6/05 at 102.00 AAA 41,087
Single Family Mortgage Revenue Bonds, Series 1995,
6.150%, 6/01/08 (Alternative Minimum Tax)
18
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 2.1% (1.5% OF TOTAL INVESTMENTS)
$ 1,345 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB $ 1,376,029
Solid Waste Disposal Revenue Bonds, Waste Management
Inc. Project, Series 2003B, 4.450%, 3/01/28 (Alternative
Minimum Tax) (Mandatory put 3/01/08)
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 0.6% (0.3% OF TOTAL INVESTMENTS)
345 Mohave County Industrial Development Authority, Arizona, 5/06 at 103.00 AAA 362,950
GNMA Collateralized Healthcare Revenue Refunding Bonds,
Chris Ridge and Silver Village Projects, Series 1996,
6.375%, 11/01/31
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 4.0% (2.8% OF TOTAL INVESTMENTS)
1,525 Maricopa County Union High School District 210, Phoenix, 7/14 at 100.00 AAA 1,659,231
Arizona, General Obligation Bonds, Series 2004A,
5.000%, 7/01/21 - FSA Insured
500 Puerto Rico, General Obligation and Public Improvement No Opt. Call AAA 594,585
Bonds, Series 2002A, 5.500%, 7/01/19 - FGIC Insured
330 Puerto Rico, General Obligation and Public Improvement 7/11 at 100.00 A- 358,849
Bonds, Series 2001A, 5.375%, 7/01/28
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 50.9% (35.2% OF TOTAL INVESTMENTS)
1,985 Arizona School Facilities Board, State School Improvement 7/13 at 100.00 AAA 2,155,154
Revenue Bonds, Series 2003, 5.000%, 7/01/21
2,000 Arizona School Facilities Board, School Improvement Revenue 7/14 at 100.00 AAA 2,336,440
Bonds, Series 2004A, 5.750%, 7/01/18 - AMBAC Insured
2,000 Arizona State Transportation Board, Subordinate Highway 7/14 at 100.00 AA 2,166,200
Revenue Bonds, Series 2004B, 5.000%, 7/01/22
Arizona Tourism and Sports Authority, Tax Revenue Bonds,
Multipurpose Stadium Facility Project, Series 2003A:
3,000 5.375%, 7/01/20 - MBIA Insured 7/13 at 100.00 Aaa 3,372,480
1,000 5.375%, 7/01/21 - MBIA Insured 7/13 at 100.00 Aaa 1,123,390
Bullhead City, Arizona, Special Assessment Bonds, Parkway
District Improvements, Series 1993:
815 6.100%, 1/01/08 7/05 at 101.00 Baa2 834,250
875 6.100%, 1/01/09 7/05 at 101.00 Baa2 894,740
524 Estrella Mountain Ranch Community Facilities District, 7/10 at 102.00 N/R 581,315
Goodyear, Arizona, Special Assessment Lien Bonds,
Series 2001A, 7.875%, 7/01/25
575 Marana Municipal Property Corporation, Arizona, Revenue 7/13 at 100.00 AAA 603,359
Bonds, Series 2003, 5.000%, 7/01/28 - AMBAC Insured
3,400 Maricopa County Stadium District, Arizona, Revenue Refunding 6/12 at 100.00 Aaa 3,804,362
Bonds, Series 2002, 5.375%, 6/01/18 - AMBAC Insured
Phoenix Industrial Development Authority, Arizona, Government
Office Lease Revenue Bonds, Capitol Mall LLC Project, Series 2000:
1,000 5.375%, 9/15/22 - AMBAC Insured 9/10 at 100.00 AAA 1,101,120
2,000 5.500%, 9/15/27 - AMBAC Insured 9/10 at 100.00 AAA 2,198,180
2,150 Phoenix Civic Plaza Building Corporation, Arizona, Senior 7/05 at 101.00 AAA 2,205,169
Lien Excise Tax Revenue Bonds, Series 1994, 6.000%, 7/01/14
2,000 Phoenix Civic Improvement Corporation, Arizona, Subordinate 7/13 at 100.00 AAA 2,161,700
Lien Excise Tax Revenue Bonds, Series 2003A,
5.000%, 7/01/21 - MBIA Insured
1,200 Prescott Valley Municipal Property Corporation, Arizona, 1/13 at 100.00 AAA 1,262,808
Municipal Facilities Revenue Bonds, Series 2003,
5.000%, 1/01/27 - FGIC Insured
1,000 Puerto Rico Public Buildings Authority, Guaranteed 7/12 at 100.00 A- 1,061,010
Government Facilities Revenue Refunding Bonds,
Series 2002D, 5.125%, 7/01/24
805 Scottsdale Preserve Authority, Arizona, Excise Tax Revenue No Opt. Call AAA 897,334
Bonds, Series 2004, 5.000%, 7/01/16 - FGIC Insured
1,350 Tempe, Arizona, Excise Tax Revenue Bonds, Series 2004, 7/14 at 100.00 AAA 1,509,934
5.250%, 7/01/20 - AMBAC Insured
500 Tucson, Arizona, Certificates of Participation, Series 2000, 7/08 at 100.00 AAA 545,895
5.700%, 7/01/20 - MBIA Insured
1,100 Tucson, Arizona, Junior Lien Street and Highway User 7/10 at 100.00 AAA 1,190,618
Revenue Bonds, Series 2000E, 5.000%, 7/01/18 - FGIC Insured
1,300 Virgin Islands Public Finance Authority, Gross Receipts Taxes 10/14 at 100.00 AA 1,355,601
Loan Notes, Series 2003, 5.000%, 10/01/33 - RAAI Insured
19
Nuveen Arizona Premium Income Municipal Fund, Inc. (NAZ) (continued)
Portfolio of INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED *** - 17.6% (12.2% OF TOTAL INVESTMENTS)
$ 480 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 7/10 at 100.00 AAA $ 517,306
Asset Backed Bonds, Series 2000, 5.750%, 7/01/20
(Pre-refunded to 7/01/10)
2,250 Maricopa County Industrial Development Authority, Arizona, No Opt. Call AAA 2,878,268
Hospital Revenue Refunding Bonds, Samaritan Health
Services, Series 1990A, 7.000%, 12/01/16 - MBIA Insured
2,300 Mesa, Arizona, General Obligation Bonds, Series 1999, 7/09 at 100.00 AAA 2,509,300
5.000%, 7/01/18 (Pre-refunded to 7/01/09) - FGIC Insured
2,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/10 at 101.00 AAA 2,315,420
Wastewater System Revenue Bonds, Series 2000,
6.000%, 7/01/24 (Pre-refunded to 7/01/10) - FGIC Insured
1,000 Puerto Rico Highway and Transportation Authority, Highway 7/10 at 101.00 A*** 1,177,590
Revenue Bonds, Series 2000B, 6.500%, 7/01/27
(Pre-refunded to 7/01/10)
1,400 Southern Arizona Capital Facilities Financing Corporation, 9/12 at 100.00 AAA 1,558,676
Student Housing Revenue Bonds, La Aldea Project at the
University of Arizona, Series 2002, 5.000%, 9/01/23
(Pre-refunded to 9/01/12) - MBIA Insured
500 Surprise Municipal Property Corporation, Arizona, Excise 7/09 at 101.00 AAA 564,365
Tax Revenue Bonds, Series 2000, 5.700%, 7/01/20
(Pre-refunded to 7/01/09) - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 10.5% (7.2% OF TOTAL INVESTMENTS)
1,000 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,137,430
Revenue Refunding Crossover Bonds, Hoover Project,
Series 2001, 5.250%, 10/01/15
1,000 Coconino County, Arizona, Pollution Control Revenue Bonds, 10/06 at 102.00 B- 1,020,860
Nevada Power Company Project, Series 1996,
6.375%, 10/01/36 (Alternative Minimum Tax)
905 Pima County Industrial Development Authority, Arizona, 7/05 at 101.50 AAA 946,087
Lease Obligation Revenue Refunding Bonds, Tucson Electric
Power Company, Series 1988A, 7.250%, 7/15/10 - FSA Insured
Salt River Project Agricultural Improvement and Power District,
Arizona, Electric System Revenue Refunding Bonds, Series 2002A:
2,000 5.125%, 1/01/27 1/12 at 101.00 AA 2,127,320
1,000 5.000%, 1/01/31 1/12 at 101.00 AA 1,044,810
530 Salt River Project Agricultural Improvement and Power 1/13 at 100.00 AA 569,702
District, Arizona, Electric System Revenue Bonds,
Series 2002B, 5.000%, 1/01/22
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 20.4% (14.1% OF TOTAL INVESTMENTS)
Arizona Water Infrastructure Finance Authority, Water Quality
Revenue Bonds, Series 2004A:
1,825 5.000%, 10/01/19 10/14 at 100.00 AAA 2,006,131
1,815 5.000%, 10/01/22 10/14 at 100.00 AAA 1,972,125
1,005 Cottonwood, Arizona, Senior Lien Sewerage Revenue Bonds, 7/14 at 100.00 AAA 1,071,400
Series 2004, 5.000%, 7/01/24 - XLCA Insured
3,500 Glendale, Arizona, Water and Sewer Revenue Bonds, 7/13 at 100.00 AAA 3,680,180
Subordinate Lien, Series 2003, 5.000%, 7/01/28 -
AMBAC Insured
600 Oro Valley Municipal Property Corporation, Arizona, Senior 7/13 at 100.00 AAA 643,608
Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 -
MBIA Insured
875 Phoenix Civic Improvement Corporation, Arizona, Junior Lien 7/14 at 100.00 AAA 939,873
Wastewater System Revenue Bonds, Series 2004,
5.000%, 7/01/24 - MBIA Insured
20
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
$ 1,250 Phoenix Civic Improvement Corporation, Arizona, Junior Lien No Opt. Call AAA $ 1,478,200
Water System Revenue Refunding Bonds, Series 2001,
5.500%, 7/01/21 - FGIC Insured
1,500 Phoenix Civic Improvement Corporation, Arizona, Junior 7/12 at 100.00 AAA 1,582,094
Lien Water System Revenue Bonds, Series 2002,
5.000%, 7/01/26 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
$ 87,304 Total Long-Term Investments (cost $88,790,839) - 144.8% 94,812,517
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.0% 678,790
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (45.8)% (30,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 65,491,307
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
* Optional Call Provisions: Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings: Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities which ensures the timely payment of
principal and interest. Such securities are normally
considered to be equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
21
Nuveen Arizona Dividend Advantage Municipal Fund (NFZ)
Portfolio of
INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 9.9% (6.7% OF TOTAL INVESTMENTS)
$ 1,020 Mesa Industrial Development Authority, Arizona, Student 7/11 at 101.00 BBB- $ 1,043,501
Housing Revenue Bonds, ASU East/Maricopa County
Community College District, Williams Campus Project,
Series 2001A, 6.000%, 7/01/26
1,000 Puerto Rico Industrial, Tourist, Educational, Medical and 2/09 at 101.00 BBB 1,033,770
Environmental Control Facilities Financing Authority, Higher
Education Revenue Bonds, Ana G. Mendez University
System, Series 1999, 5.375%, 2/01/29
300 Puerto Rico Industrial, Tourist, Educational, Medical and 9/11 at 100.00 BBB 316,530
Environmental Control Facilities Financing Authority, Higher
Education Revenue Bonds, University of the Sacred Heart,
Series 2001, 5.250%, 9/01/21
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 12.0% (8.1% OF TOTAL INVESTMENTS)
550 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB 622,138
Bonds, John C. Lincoln Health Network, Series 2000,
6.875%, 12/01/20
365 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 BBB+ 409,534
Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20
750 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 BBB+ 789,593
Health Facility Revenue Bonds, Catholic Healthcare West,
Series 2004A, 5.375%, 7/01/23
1,000 Scottsdale Industrial Development Authority, Arizona, 12/11 at 101.00 A3 1,078,590
Hospital Revenue Bonds, Scottsdale Healthcare,
Series 2001, 5.800%, 12/01/31
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 15.8% (10.7% OF TOTAL INVESTMENTS)
1,000 Maricopa County Industrial Development Authority, Arizona, 7/09 at 102.00 Aaa 1,021,160
Multifamily Housing Revenue Bonds, Whispering Palms
Apartments, Series 1999A, 5.900%, 7/01/29 - MBIA Insured
1,125 Maricopa County Industrial Development Authority, Arizona, 10/11 at 103.00 Aaa 1,207,260
Multifamily Housing Revenue Bonds, Syl-Mar Apartments,
Series 2001, 5.650%, 4/20/21 (Alternative Minimum Tax)
275 Phoenix Industrial Development Authority, Arizona, GNMA 6/11 at 102.00 Aaa 290,331
Collateralized Multifamily Housing Revenue Bonds,
Campaigne Place on Jackson, Series 2001, 5.700%, 6/20/31
(Alternative Minimum Tax)
205 Phoenix Industrial Development Authority, Arizona, GNMA 4/15 at 100.00 Aaa 205,976
Collateralized Multifamily Housing Revenue Bonds,
Park Lee Apartments, Series 2004A, 5.050%, 10/20/44
(Alternative Minimum Tax)
1,000 Phoenix Industrial Development Authority, Arizona, GNMA 9/10 at 103.00 Aaa 1,084,930
Collateralized Mortgage Loan Multifamily Housing Revenue
Bonds, Camelback Crossings Apartments Project, Series 2000,
6.350%, 9/20/35
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 1.1% (0.8% OF TOTAL INVESTMENTS)
260 Pima County Industrial Development Authority, Arizona, 11/10 at 101.00 AAA 275,509
FNMA/GNMA Single Family Mortgage Revenue Bonds,
Series 2001A-4, 5.050%, 5/01/17
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 2.2% (1.5% OF TOTAL INVESTMENTS)
510 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB 521,766
Solid Waste Disposal Revenue Bonds, Waste Management
Inc. Project, Series 2003B, 4.450%, 3/01/28 (Alternative
Minimum Tax) (Mandatory put 3/01/08)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 4.4% (3.0% OF TOTAL INVESTMENTS)
1,020 Tucson, Arizona, General Obligation Refunding Bonds, 7/07 at 100.00 AA 1,069,745
Series 1997, 5.000%, 7/01/19
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 61.2% (41.3% OF TOTAL INVESTMENTS)
700 Arizona School Facilities Board, School Improvement Revenue 7/11 at 100.00 AAA 790,538
Bonds, Series 2001, 5.500%, 7/01/18
2,750 Arizona School Facilities Board, School Improvement Revenue 7/14 at 100.00 AAA 3,212,605
Bonds, Series 2004A, 5.750%, 7/01/18 - AMBAC Insured
1,000 Arizona Tourism and Sports Authority, Tax Revenue Bonds, 7/13 at 100.00 Aaa 1,123,390
Multipurpose Stadium Facility Project, Series 2003A,
5.375%, 7/01/21 - MBIA Insured
22
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 203 Estrella Mountain Ranch Community Facilities District, 7/10 at 102.00 N/R $ 225,204
Goodyear, Arizona, Special Assessment Lien Bonds,
Series 2001A, 7.875%, 7/01/25
1,180 Marana Municipal Property Corporation, Arizona, Revenue 7/13 at 100.00 AAA 1,265,762
Bonds, Series 2003, 5.000%, 7/01/23 - AMBAC Insured
2,000 Maricopa County Industrial Development Authority, Arizona, 6/07 at 102.00 A 2,105,760
Education Revenue Bonds, Horizon Community Learning
Center Project, Series 2000, 6.350%, 6/01/26 - ACA Insured
900 Phoenix Industrial Development Authority, Arizona, Government 3/12 at 100.00 AAA 996,102
Bonds, Capitol Mall LLC II Project, Series 2001,
5.250%, 9/15/16 - AMBAC Insured
680 Pinal County Industrial Development Authority, Arizona, No Opt. Call A 705,371
Correctional Facilities Contract Revenue Bonds, Florence
West Prison LLC, Series 2002A, 5.000%, 10/01/18 -
ACA Insured
2,675 Tempe, Arizona, Excise Tax Revenue Refunding Bonds, 7/13 at 100.00 AA+ 2,891,274
Series 2003, 5.000%, 7/01/21
1,000 Tempe, Arizona, Excise Tax Revenue Bonds, Series 2004, 7/14 at 100.00 AAA 1,118,470
5.250%, 7/01/20 - AMBAC Insured
305 Tucson Industrial Development Authority, Arizona, Charter 9/14 at 100.00 BBB- 306,626
School Revenue Bonds, Arizona Agribusiness and Equine
Center Charter School, Series 2004A, 6.125%, 9/01/34
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED *** - 11.7% (7.9% OF TOTAL INVESTMENTS)
1,000 Mesa, Arizona, General Obligation Bonds, Series 1999, 7/09 at 100.00 AAA 1,091,000
5.000%, 7/01/17 (Pre-refunded to 7/01/09) - FGIC Insured
1,000 Mesa, Arizona, Utility System Revenue Bonds, Series 2000, 7/09 at 100.00 AAA 1,096,160
5.125%, 7/01/19 (Pre-refunded to 7/01/09) - FGIC Insured
Salt River Project Agricultural Improvement and Power District,
Arizona, Electric System Revenue Refunding Bonds, Series 1997A:
140 5.000%, 1/01/20 (Pre-refunded to 1/01/08) 1/08 at 101.00 AA*** 150,818
430 5.000%, 1/01/20 (Pre-refunded to 1/01/08) 1/08 at 101.00 AA*** 474,703
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 22.0% (14.9% OF TOTAL INVESTMENTS)
1,500 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,712,925
Revenue Refunding Crossover Bonds, Hoover Project,
Series 2001, 5.250%, 10/01/17
500 Coconino County, Arizona, Pollution Control Revenue Bonds, 5/05 at 100.00 B- 496,535
Nevada Power Company Project, Series 1997B,
5.800%, 11/01/32 (Alternative Minimum Tax)
1,000 Mesa, Arizona, Utility System Revenue Refunding Bonds, No Opt. Call AAA 1,147,250
Series 2002, 5.250%, 7/01/17 - FGIC Insured
350 Puerto Rico Electric Power Authority, Power Revenue Bonds, 7/12 at 101.00 AAA 376,670
Series 2002II, 5.125%, 7/01/26 - FSA Insured
1,000 Salt River Project Agricultural Improvement and Power 1/12 at 101.00 AA 1,108,270
District, Arizona, Electric System Revenue Refunding Bonds,
Series 2002A, 5.250%, 1/01/18
200 Salt River Project Agricultural Improvement and Power District, 1/13 at 100.00 AA 214,982
Arizona, Electric System Revenue Bonds, Series 2002B,
5.000%, 1/01/22
235 Salt River Project Agricultural Improvement and Power District, 1/08 at 101.00 AA 249,030
Arizona, Electric System Revenue Refunding Bonds,
Series 1997A, 5.000%, 1/01/20
23
Nuveen Arizona Dividend Advantage Municipal Fund (NFZ) (continued)
Portfolio of INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 7.6% (5.1% OF TOTAL INVESTMENTS)
$ 225 Oro Valley Municipal Property Corporation, Arizona, Senior 7/13 at 100.00 AAA $ 241,353
Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 -
MBIA Insured
1,500 Phoenix Civic Improvement Corporation, Arizona, Junior 7/12 at 100.00 AAA 1,582,093
Lien Water System Revenue Bonds, Series 2002,
5.000%, 7/01/26 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
$ 32,853 Total Long-Term Investments (cost $33,571,712) - 147.9% 35,653,224
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.9% 446,383
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (49.8)% (12,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 24,099,607
====================================================================================================================
FORWARD SWAP CONTRACTS OUTSTANDING AT JANUARY 31, 2005:
SWAP UNREALIZED
NOTIONAL EFFECTIVE TERMINATION APPRECIATION
AMOUNT DATE(2) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
Agreement with Morgan Stanley dated August 4, 2004, to pay semi-annually the
notional amount multiplied by 5.660% (annualized) and receive quarterly the
notional amount multiplied by the three-month USD-LIBOR (United States
Dollar - London Inter-Bank Offered Rates). $600,000 2/16/05 2/16/35 $(64,448)
Agreement with Goldman Sachs dated December 6, 2004, to pay semi-annually
the notional amount multiplied by 5.324% (annualized) and receive quarterly
the notional amount multiplied by the three-month USD-LIBOR (United States
Dollar - London Inter-Bank Offered Rates). 200,000 7/11/05 7/11/25 (8,826)
------------------------------------------------------------------------------------------------------------------------------------
$(73,274)
====================================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(2) Effective date represents the date on which both the
Fund and counterparty commence interest payment
accruals on each forward swap contract.
* Optional Call Provisions: Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings: Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities which ensures the timely payment of
principal and interest. Such securities are normally
considered to be equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
24
Nuveen Arizona Dividend Advantage Municipal Fund 2 (NKR)
Portfolio of
INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 10.2% (7.0% OF TOTAL INVESTMENTS)
$ 715 Arizona State University, System Revenue Bonds, Series 2002, 7/12 at 100.00 AAA $ 822,286
5.750%, 7/01/27 - FGIC Insured
1,250 Glendale Industrial Development Authority, Arizona, Revenue 5/11 at 101.00 A- 1,342,987
Bonds, Midwestern University, Series 2001A, 5.875%, 5/15/31
320 Puerto Rico Industrial, Tourist, Educational, Medical and 2/09 at 101.00 BBB 335,939
Environmental Control Facilities Financing Authority, Higher
Education Revenue Bonds, Ana G. Mendez University System,
Series 1999, 5.375%, 2/01/19
University of Arizona, Certificates of Participation, Series 2002A:
750 5.500%, 6/01/18 - AMBAC Insured 6/12 at 100.00 AAA 842,115
500 5.125%, 6/01/22 - AMBAC Insured 6/12 at 100.00 AAA 540,465
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 18.4% (12.6% OF TOTAL INVESTMENTS)
735 Arizona Health Facilities Authority, Hospital System Revenue 2/12 at 101.00 Ba2 755,992
Bonds, Phoenix Children's Hospital, Series 2002A,
6.250%, 2/15/21
400 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 BBB+ 448,804
Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20
600 Arizona Health Facilities Authority, Revenue Bonds, Blood 4/14 at 100.00 A- 616,392
Systems Inc., Series 2004, 5.000%, 4/01/20
1,375 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 BBB+ 1,447,586
Health Facility Revenue Bonds, Catholic Healthcare West,
Series 2004A, 5.375%, 7/01/23
500 Maricopa County Industrial Development Authority, Arizona, 5/08 at 101.00 AA 533,485
Hospital Revenue Bonds, Mayo Clinic Hospital, Series 1998,
5.250%, 11/15/37
1,000 Mesa Industrial Development Authority, Arizona, Revenue 1/10 at 101.00 AAA 1,099,810
Bonds, Discovery Health System, Series 1999A,
5.625%, 1/01/29 - MBIA Insured
1,000 Scottsdale Industrial Development Authority, Arizona, 12/11 at 101.00 A3 1,078,590
Hospital Revenue Bonds, Scottsdale Healthcare,
Series 2001, 5.800%, 12/01/31
1,000 Yavapai County Industrial Development Authority, Arizona, 8/13 at 100.00 Baa2 1,065,360
Hospital Revenue Bonds, Yavapai Regional Medical Center,
Series 2003A, 6.000%, 8/01/33
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 7.7% (5.3% OF TOTAL INVESTMENTS)
1,000 Maricopa County Industrial Development Authority, Arizona, 10/11 at 105.00 AAA 1,062,230
GNMA Collateralized Multifamily Housing Revenue
Refunding Bonds, Pine Ridge, Cambridge Court, Cove on 44th
and Fountain Place Apartments, Series 2001A-1,
6.000%, 10/20/31
1,425 Phoenix Industrial Development Authority, Arizona, GNMA 7/12 at 105.00 AAA 1,555,673
Collateralized Multifamily Housing Revenue Bonds, Summit
Apartments, Series 2002, 6.450%, 7/20/32
325 Phoenix Industrial Development Authority, Arizona, GNMA 4/15 at 100.00 Aaa 326,547
Collateralized Multifamily Housing Revenue Bonds, Park Lee
Apartments, Series 2004A, 5.050%, 10/20/44 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 0.3% (0.3% OF TOTAL INVESTMENTS)
125 Pima County Industrial Development Authority, Arizona, 11/10 at 101.00 AAA 130,260
FNMA/GNMA Single Family Mortgage Revenue Bonds,
Series 2001A-1, 5.350%, 11/01/24 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 2.2% (1.5% OF TOTAL INVESTMENTS)
810 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB 828,687
Solid Waste Disposal Revenue Bonds, Waste Management
Inc. Project, Series 2003B, 4.450%, 3/01/28 (Alternative
Minimum Tax) (Mandatory put 3/01/08)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 38.2% (26.1% OF TOTAL INVESTMENTS)
1,725 Chandler, Arizona, General Obligation Bonds, Series 2002, 7/12 at 100.00 AA+ 1,878,922
5.000%, 7/01/17
1,000 Gilbert, Arizona, General Obligation Bonds, Series 2002A, 7/11 at 100.00 AAA 1,088,510
5.000%, 7/01/18 - AMBAC Insured
25
Nuveen Arizona Dividend Advantage Municipal Fund 2 (NKR) (continued)
Portfolio of INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
Maricopa County School District 6, Arizona, General Obligation
Refunding Bonds, Washington Elementary School, Series 2002A:
$ 1,000 5.375%, 7/01/15 - FSA Insured No Opt. Call AAA $ 1,157,260
1,000 5.375%, 7/01/16 - FSA Insured No Opt. Call AAA 1,159,340
1,165 Maricopa County Unified School District 69, Paradise Valley, No Opt. Call AAA 1,328,822
Arizona, General Obligation Refunding Bonds, Series 2002A,
5.250%, 7/01/14 - FGIC Insured
1,000 Mesa, Arizona, General Obligation Bonds, Series 2000, No Opt. Call AAA 1,192,260
6.500%, 7/01/11 - FGIC Insured
1,405 Mesa, Arizona, General Obligation Bonds, Series 2002, No Opt. Call AAA 1,625,950
5.375%, 7/01/15 - FGIC Insured
Phoenix, Arizona, Various Purpose General Obligation Bonds,
Series 2002B:
1,700 5.000%, 7/01/22 7/12 at 100.00 AA+ 1,838,363
500 5.000%, 7/01/27 7/12 at 100.00 AA+ 525,735
1,000 Pinal County Unified School District 43, Apache Junction, No Opt. Call AAA 1,184,870
Arizona, General Obligation Refunding Bonds, Series 2001,
5.750%, 7/01/15 - FGIC Insured
1,500 Scottsdale, Arizona, General Obligation Bonds, Series 2002, 7/11 at 100.00 AAA 1,612,290
5.000%, 7/01/24
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 45.0% (30.9% OF TOTAL INVESTMENTS)
Arizona State, Certificates of Participation, Series 2002A:
750 5.000%, 11/01/17 - MBIA Insured 5/12 at 100.00 AAA 813,600
1,000 5.000%, 11/01/18 - MBIA Insured 5/12 at 100.00 AAA 1,084,200
500 5.000%, 11/01/20 - MBIA Insured 5/12 at 100.00 AAA
1,000 Arizona State Transportation Board, Highway Revenue Bonds, 7/12 at 100.00 AAA 1,104,890
Series 2002B, 5.250%, 7/01/21
322 Estrella Mountain Ranch Community Facilities District, 7/10 at 102.00 N/R 357,220
Goodyear, Arizona, Special Assessment Lien Bonds,
Series 2001A, 7.875%, 7/01/25
670 Goodyear Community Facilities Utility District 1, Arizona, 7/13 at 100.00 A 689,484
General Obligation Bonds, Series 2003, 5.350%, 7/15/28 -
ACA Insured
1,000 Maricopa County Public Finance Authority, Arizona, Lease 7/11 at 100.00 Aaa 1,127,490
Revenue Bonds, Series 2001, 5.500%, 7/01/15 -
AMBAC Insured
Maricopa County Stadium District, Arizona, Revenue Refunding
Bonds, Series 2002:
840 5.375%, 6/01/18 - AMBAC Insured 6/12 at 100.00 Aaa 939,901
2,645 5.375%, 6/01/19 - AMBAC Insured 6/12 at 100.00 Aaa 2,959,570
1,000 Mesa, Arizona, Street and Highway User Tax Revenue Bonds, 7/14 at 100.00 AAA 1,090,720
Series 2004, 5.125%, 7/01/23 - FSA Insured
1,500 Phoenix Industrial Development Authority, Arizona, 3/12 at 100.00 AAA 1,660,170
Government Bonds, Capitol Mall LLC II Project, Series 2001,
5.250%, 9/15/16 - AMBAC Insured
460 Pima County Industrial Development Authority, Arizona, 12/14 at 100.00 BBB- 466,803
Charter School Revenue Bonds, Noah Webster Basic Schools
Inc., Series 2004, 6.000%, 12/15/24
1,070 Pinal County Industrial Development Authority, Arizona, No Opt. Call A 1,109,922
Correctional Facilities Contract Revenue Bonds, Florence
West Prison LLC, Series 2002A, 5.000%, 10/01/18 -
ACA Insured
1,000 Puerto Rico Public Buildings Authority, Guaranteed Government 7/12 at 100.00 A- 1,061,010
Facilities Revenue Refunding Bonds, Series 2002D,
5.125%, 7/01/24
480 Tucson Industrial Development Authority, Arizona, 9/14 at 100.00 BBB- 482,558
Charter School Revenue Bonds, Arizona Agribusiness and
Equine Center Charter School, Series 2004A, 6.125%, 9/01/34
1,000 Tucson, Arizona, Junior Lien Street and Highway User Revenue 7/10 at 100.00 AAA 1,082,380
Bonds, Series 2000E, 5.000%, 7/01/18 - FGIC Insured
640 Yuma Municipal Property Corporation, Arizona, Municipal 7/10 at 100.00 AAA 685,997
Facilities Tax Revenue Bonds, Series 2001,
5.000%, 7/01/21 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 5.5% (3.7% OF TOTAL INVESTMENTS)
1,000 Phoenix Civic Improvement Corporation, Arizona, Senior Lien 7/08 at 101.00 AAA 1,036,930
Airport Revenue Bonds, Series 1998A, 5.000%, 7/01/25 -
FSA Insured
1,000 Phoenix, Arizona, Civic Improvement Corporation, Senior Lien 7/12 at 100.00 AAA 1,047,450
Airport Revenue Bonds, Series 2002B, 5.250%, 7/01/27
(Alternative Minimum Tax) - FGIC Insured
26
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED *** - 3.0% (2.0% OF TOTAL INVESTMENTS)
$ 1,000 Maricopa County Unified School District 89, Dysart, Arizona, 7/14 at 100.00 AAA $ 1,139,760
General Obligation Bonds, Series 2004B, 5.250%, 7/01/20
(Pre-refunded to 7/01/14) - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 7.1% (4.8% OF TOTAL INVESTMENTS)
1,115 Arizona Power Authority, Special Obligation Power Resource No Opt. Call AA 1,268,234
Revenue Refunding Crossover Bonds, Hoover Project,
Series 2001, 5.250%, 10/01/15
1,000 Mesa, Arizona, Utility System Revenue Bonds, Series 2002, 7/11 at 100.00 AAA 1,084,200
5.000%, 7/01/20 - FGIC Insured
320 Salt River Project Agricultural Improvement and Power 1/13 at 100.00 AA 343,971
District, Arizona, Electric System Revenue Bonds,
Series 2002B, 5.000%, 1/01/22
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 8.5% (5.8% OF TOTAL INVESTMENTS)
500 Maricopa County Industrial Development Authority, Arizona, 12/07 at 102.00 AAA 535,505
Water System Improvement Revenue Bonds, Chaparral City
Water Company, Series 1997A, 5.400%, 12/01/22
(Alternative Minimum Tax) - AMBAC Insured
360 Oro Valley Municipal Property Corporation, Arizona, Senior 7/13 at 100.00 AAA 386,166
Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 -
MBIA Insured
1,000 Phoenix Civic Improvement Corporation, Arizona, Junior Lien No Opt. Call AAA 1,184,750
Water System Revenue Refunding Bonds, Series 2001,
5.500%, 7/01/22 - FGIC Insured
1,000 Tucson, Arizona, Water System Revenue Refunding Bonds, 7/12 at 102.00 AAA 1,138,100
Series 2002, 5.500%, 7/01/18 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
$ 50,997 Total Long-Term Investments (cost $52,124,847) - 146.1% 55,845,706
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 2.3% 886,649
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (48.4)% (18,500,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 38,232,355
====================================================================================================================
FORWARD SWAP CONTRACTS OUTSTANDING AT JANUARY 31, 2005:
SWAP UNREALIZED
NOTIONAL EFFECTIVE TERMINATION APPRECIATION
AMOUNT DATE(2) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
Agreement with Morgan Stanley dated August 4, 2004, to pay semi-annually
the notional amount multiplied by 5.660% (annualized) and receive
quarterly the notional amount multiplied by the three-month USD-LIBOR
(United States Dollar - London Inter-Bank Offered Rates). $1,100,000 2/16/05 2/16/35 $(118,155)
Agreement with Goldman Sachs dated December 6, 2004, to pay semi-annually
the notional amount multiplied by 5.324% (annualized) and receive
quarterly the notional amount multiplied by the three-month
USD-LIBOR (United States Dollar - London Inter-Bank Offered Rates). 800,000 7/11/05 7/11/25 (35,303)
Agreement with JP Morgan dated January 11, 2005, to pay semi-annually
the notional amount multiplied by 5.235% (annualized) and receive
quarterly the notional amount multiplied by the three-month USD-LIBOR
(United States Dollar - London Inter-Bank Offered Rates). 750,000 8/17/05 8/17/25 (23,231)
------------------------------------------------------------------------------------------------------------------------------------
$(176,689)
====================================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(2) Effective date represents the date on which both the
Fund and counterparty commence interest payment
accruals on each forward swap contract.
* Optional Call Provisions: Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings: Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities which ensures the timely payment of
principal and interest.
N/R Investment is not rated.
See accompanying notes to financial statements.
27
Nuveen Arizona Dividend Advantage Municipal Fund 3 (NXE)
Portfolio of
INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 4.0% (2.7% OF TOTAL INVESTMENTS)
$ 1,880 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 1,837,080
Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 15.6% (10.6% OF TOTAL INVESTMENTS)
2,000 Arizona State University, System Revenue Bonds, Series 2002, 7/12 at 100.00 AAA 2,300,100
5.750%, 7/01/27 - FGIC Insured
1,000 Arizona Student Loan Acquisition Authority, Student Loan 11/09 at 102.00 Aaa 1,090,750
Revenue Refunding Bonds, Senior Series 1999A-1,
5.750%, 5/01/15 (Alternative Minimum Tax)
1,130 Energy Management Services LLC, Arizona State University, 7/12 at 100.00 AAA 1,255,046
Energy Conservation Revenue Bonds, Main Campus Project,
Series 2002, 5.250%, 7/01/18 - MBIA Insured
270 Glendale Industrial Development Authority, Arizona, Revenue 5/08 at 101.00 A- 279,250
Bonds, Midwestern University, Series 1998A,
5.375%, 5/15/28
2,000 University of Arizona, Certificates of Participation, 6/12 at 100.00 AAA 2,177,060
Series 2002B, 5.125%, 6/01/20 - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 21.7% (14.7% OF TOTAL INVESTMENTS)
Arizona Health Facilities Authority, Hospital System Revenue
Bonds, Phoenix Children's Hospital, Series 1999A:
750 6.125%, 11/15/22 11/09 at 100.00 Ba2 759,983
520 6.250%, 11/15/29 11/09 at 100.00 Ba2 529,604
1,000 Arizona Health Facilities Authority, Hospital System Revenue 12/10 at 102.00 BBB 1,131,160
Bonds, John C. Lincoln Health Network, Series 2000,
6.875%, 12/01/20
300 Arizona Health Facilities Authority, Hospital Revenue Bonds, 7/10 at 101.00 BBB+ 336,603
Catholic Healthcare West, Series 1999A, 6.625%, 7/01/20
625 Arizona Health Facilities Authority, Revenue Bonds, Blood 4/14 at 100.00 A- 642,075
Systems Inc., Series 2004, 5.000%, 4/01/20
1,825 Maricopa County Industrial Development Authority, Arizona, 7/14 at 100.00 BBB+ 1,921,342
Health Facility Revenue Bonds, Catholic Healthcare West,
Series 2004A, 5.375%, 7/01/23
2,000 Maricopa County Industrial Development Authority, Arizona, 5/08 at 101.00 AA 2,133,940
Hospital Revenue Bonds, Mayo Clinic Hospital, Series 1998,
5.250%, 11/15/37
1,250 Scottsdale Industrial Development Authority, Arizona, 12/11 at 101.00 A3 1,348,237
Hospital Revenue Bonds, Scottsdale Healthcare, Series 2001,
5.800%, 12/01/31
1,000 Yavapai County Industrial Development Authority, Arizona, 8/13 at 100.00 Baa2 1,065,360
Hospital Revenue Bonds, Yavapai Regional Medical Center,
Series 2003A, 6.000%, 8/01/33
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 10.5% (7.1% OF TOTAL INVESTMENTS)
2,500 Maricopa County Industrial Development Authority, Arizona, 10/10 at 105.00 Aaa 2,712,850
GNMA Collateralized Multifamily Housing Revenue Bonds,
Villas at Augusta, Series 2000, 6.500%, 10/20/33
1,545 Phoenix Industrial Development Authority, Arizona, GNMA 6/11 at 102.00 Aaa 1,659,191
Collateralized Multifamily Housing Revenue Bonds, Campaigne
Place on Jackson, Series 2001, 5.600%, 6/20/21 (Alternative
Minimum Tax)
380 Phoenix Industrial Development Authority, Arizona, GNMA 4/15 at 100.00 Aaa 381,809
Collateralized Multifamily Housing Revenue Bonds, Park Lee
Apartments, Series 2004A, 5.050%, 10/20/44 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
INDUSTRIALS - 2.1% (1.4% OF TOTAL INVESTMENTS)
945 Yavapai County Industrial Development Authority, Arizona, No Opt. Call BBB 966,801
Solid Waste Disposal Revenue Bonds, Waste Management
Inc. Project, Series 2003B, 4.450%, 3/01/28 (Alternative
Minimum Tax) (Mandatory put 3/01/08)
28
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 23.5% (15.9% OF TOTAL INVESTMENTS)
$ 660 Chandler, Arizona, General Obligation Bonds, Series 2002, 7/12 at 100.00 AA+ $ 718,852
5.000%, 7/01/18
2,250 DC Ranch Community Facilities District, Scottsdale, Arizona, 7/13 at 100.00 Aaa 2,374,493
General Obligation Bonds, Series 2002, 5.000%, 7/15/27 -
AMBAC Insured
1,930 Glendale, Arizona, General Obligation Refunding Bonds, 7/11 at 100.00 AA 2,097,929
Series 2002, 5.000%, 7/01/19
1,000 Maricopa County Unified School District 11, Peoria, Arizona, No Opt. Call AAA 1,120,220
General Obligation Refunding Bonds, Series 2002,
5.000%, 7/01/15 - FSA Insured
765 Maricopa County Unified School District 69, Paradise Valley, No Opt. Call AAA 859,799
Arizona, General Obligation Refunding Bonds, Second
Series 2002, 5.000%, 7/01/15 - FSA Insured
1,575 Maricopa County Union High School District 210, Phoenix, 7/14 at 100.00 AAA 1,718,829
Arizona, General Obligation Bonds, Series 2004A,
5.000%, 7/01/20 - FSA Insured
1,150 Scottsdale, Arizona, General Obligation Refunding Bonds, No Opt. Call AAA 1,297,878
Series 2002, 5.000%, 7/01/16
440 Tucson, Arizona, General Obligation Bonds, Series 2001B, 7/11 at 100.00 AA 477,048
5.000%, 7/01/20
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 40.8% (27.5% OF TOTAL INVESTMENTS)
2,000 Arizona School Facilities Board, School Improvement Revenue 7/12 at 100.00 AAA 2,229,600
Bonds, Series 2002, 5.250%, 7/01/20
3,000 Arizona State Transportation Board, Highway Revenue 7/12 at 102.00 AAA 3,334,470
Refunding Bonds, Series 2002A, 5.250%, 7/01/18
1,000 Arizona State Transportation Board, Highway Revenue Bonds, 7/12 at 100.00 AAA 1,104,000
Series 2002B, 5.250%, 7/01/22
2,660 Arizona Tourism and Sports Authority, Tax Revenue Bonds, 7/13 at 100.00 Aaa 2,990,266
Multipurpose Stadium Facility Project, Series 2003A,
5.375%, 7/01/20 - MBIA Insured (PLG)
376 Estrella Mountain Ranch Community Facilities District, 7/10 at 102.00 N/R 417,127
Goodyear, Arizona, Special Assessment Lien Bonds,
Series 2001A, 7.875%, 7/01/25
800 Goodyear Community Facilities Utility District 1, Arizona, 7/13 at 100.00 A 823,264
General Obligation Bonds, Series 2003, 5.350%, 7/15/28 -
ACA Insured
2,000 Mohave County, Arizona, Certificates of Participation, 7/14 at 100.00 AAA 2,233,580
Series 2004, 5.250%, 7/01/19 - AMBAC Insured
540 Pima County Industrial Development Authority, Arizona, 12/14 at 100.00 BBB- 547,987
Charter School Revenue Bonds, Noah Webster Basic
Schools Inc., Series 2004, 6.000%, 12/15/24
1,250 Pinal County Industrial Development Authority, Arizona, No Opt. Call A 1,296,637
Correctional Facilities Contract Revenue Bonds, Florence
West Prison LLC, Series 2002A, 5.000%, 10/01/18 -
ACA Insured
2,770 Tempe, Arizona, Excise Tax Revenue Refunding Bonds, 7/13 at 100.00 AA+ 2,981,794
Series 2003, 5.000%, 7/01/22
565 Tucson Industrial Development Authority, Arizona, Charter 9/14 at 100.00 BBB- 568,011
School Revenue Bonds, Arizona Agribusiness and Equine
Center Charter School, Series 2004A, 6.125%, 9/01/34
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 13.5% (9.1% OF TOTAL INVESTMENTS)
Phoenix, Arizona, Civic Improvement Corporation, Senior Lien
Airport Revenue Bonds, Series 2002B:
1,000 5.750%, 7/01/16 (Alternative Minimum Tax) - FGIC Insured 7/12 at 100.00 AAA 1,129,520
2,300 5.250%, 7/01/21 (Alternative Minimum Tax) - FGIC Insured 7/12 at 100.00 AAA 2,451,708
2,450 Tucson Airport Authority Inc., Arizona, Revenue Refunding 6/11 at 100.00 AAA 2,553,023
Bonds, Series 2001B, 5.000%, 6/01/20 (Alternative
Minimum Tax) - AMBAC Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED *** - 0.6% (0.3% OF TOTAL INVESTMENTS)
230 Glendale Industrial Development Authority, Arizona, 5/08 at 101.00 AAA 252,098
Revenue Bonds, Midwestern University, Series 1998A,
5.375%, 5/15/28 (Pre-refunded to 5/15/08)
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 6.0% (4.1% OF TOTAL INVESTMENTS)
1,250 Maricopa County Pollution Control Corporation, Arizona, 11/12 at 100.00 AAA 1,311,325
Revenue Bonds, Arizona Public Service Company - Palo Verde
Project, Series 2002A, 5.050%, 5/01/29 - AMBAC Insured
Salt River Project Agricultural Improvement and Power District,
Arizona, Electric System Revenue Bonds, Series 2002B:
360 5.000%, 1/01/22 1/13 at 100.00 AA 386,968
1,000 5.000%, 1/01/31 1/13 at 100.00 AA 1,044,810
29
Nuveen Arizona Dividend Advantage Municipal Fund 3 (NXE) (continued)
Portfolio of INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 9.7% (6.6% OF TOTAL INVESTMENTS)
$ 650 Arizona Water Infrastructure Finance Authority, Water Quality 10/14 at 100.00 AAA $ 706,271
Revenue Bonds, Series 2004A, 5.000%, 10/01/22
405 Oro Valley Municipal Property Corporation, Arizona, Senior 7/13 at 100.00 AAA 434,435
Lien Water Revenue Bonds, Series 2003, 5.000%, 7/01/23 -
MBIA Insured
1,000 Phoenix Civic Improvement Corporation, Arizona, Junior 7/11 at 100.00 AAA 1,092,640
Lien Wastewater System Revenue Refunding Bonds,
Series 2001, 5.125%, 7/01/21 - FGIC Insured
2,000 Phoenix Civic Improvement Corporation, Arizona, Junior 7/12 at 100.00 AAA 2,174,000
Lien Water System Revenue Bonds, Series 2002,
5.000%, 7/01/18 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
$ 62,296 Total Long-Term Investments (cost $64,469,098) - 148.0% 67,256,823
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.4% 199,577
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (48.4)% (22,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 45,456,400
====================================================================================================================
FORWARD SWAP CONTRACTS OUTSTANDING AT JANUARY 31, 2005:
SWAP UNREALIZED
NOTIONAL EFFECTIVE TERMINATION APPRECIATION
AMOUNT DATE(2) DATE (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------------
Agreement with Morgan Stanley dated August 4, 2004, to pay semi-annually
the notional amount multiplied by 5.660% (annualized) and receive
quarterly the notional amount multiplied by the three-month USD-LIBOR
(United States Dollar - London Inter-Bank Offered Rates). $2,000,000 2/16/05 2/16/35 $(214,827)
Agreement with Goldman Sachs dated December 6, 2004, to pay semi-annually
the notional amount multiplied by 5.324% (annualized) and receive
quarterly the notional amount multiplied by the three-month USD-LIBOR
(United States Dollar - London Inter-Bank Offered Rates). 1,000,000 7/11/05 7/11/25 (44,127)
Agreement with JP Morgan dated January 11, 2005, to pay semi-annually
the notional amount multiplied by 5.235% (annualized) and receive
quarterly the notional amount multiplied by the three-month USD-LIBOR
(United States Dollar - London Inter-Bank Offered Rates). 850,000 8/17/05 8/17/25 (26,330)
------------------------------------------------------------------------------------------------------------------------------------
$(285,284)
====================================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
(2) Effective date represents the date on which both the
Fund and counterparty commence interest payment
accruals on each forward swap contract.
* Optional Call Provisions: Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices
later dates.
** Ratings: Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities which ensures the timely payment of
principal and interest.
N/R Investment is not rated.
(PLG) Portion of security, with an aggregate market value of
$337,248, has been pledged to collateralize the net
payment obligations under forward swap contracts.
See accompanying notes to financial statements.
30
Nuveen Texas Quality Income Municipal Fund (NTX)
Portfolio of
INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES - 1.9% (1.2% OF TOTAL INVESTMENTS)
$ 2,820 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 5/12 at 100.00 BBB $ 2,755,619
Asset-Backed Refunding Bonds, Series 2002, 5.375%, 5/15/33
------------------------------------------------------------------------------------------------------------------------------------
EDUCATION AND CIVIC ORGANIZATIONS - 12.5% (8.7% OF TOTAL INVESTMENTS)
1,000 Raven Hills Higher Education Corporation, Texas, Student 8/11 at 100.00 Aaa 1,089,730
Housing Revenue Bonds, Lamar University - Cardinal
Village LLC, Series 2001A, 5.250%, 8/01/24 - MBIA Insured
Texas Public Finance Authority, Revenue Bonds, Texas
Southern University Financing System, Series 2003:
1,710 5.000%, 5/01/18 - FGIC Insured 5/13 at 100.00 Aaa 1,855,829
1,795 5.000%, 5/01/19 - FGIC Insured 5/13 at 100.00 Aaa 1,942,262
1,885 5.000%, 5/01/20 - FGIC Insured 5/13 at 100.00 Aaa 2,034,104
2,000 Texas State University System, Financing Revenue Refunding 3/12 at 100.00 AAA 2,156,980
Bonds, Series 2002, 5.000%, 3/15/20 - FSA Insured
1,665 Texas State University System, Financing Revenue Bonds, 9/14 at 100.00 AAA 1,775,573
Series 2004, 5.000%, 3/15/24 - FSA Insured
2,330 Universal City Education Facilities Corporation, Texas, 3/11 at 102.00 A- 2,459,478
Revenue Bonds, Wayland Baptist University Project,
Series 2001, 5.625%, 3/01/26
5,000 University of North Texas, Financing System Revenue Bonds, 4/12 at 100.00 AAA 5,318,750
Series 2001, 5.000%, 4/15/24 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
ENERGY - 2.0% (1.4% OF TOTAL INVESTMENTS)
3,000 Gulf Coast Waste Disposal Authority, Texas, Waste 4/08 at 102.00 BBB 3,028,770
Disposal Revenue Bonds, Valero Energy Corporation Project,
Series 1998, 5.600%, 4/01/32 (Alternative Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE - 24.0% (16.6% OF TOTAL INVESTMENTS)
3,500 Abilene Health Facilities Development Corporation, Texas, 9/05 at 102.00 AAA 3,642,310
Hospital Revenue Refunding and Improvement Bonds,
Hendrick Medical Center Project, Series 1995C,
6.150%, 9/01/25 - MBIA Insured
Brazoria County Health Facilities Development Corporation,
Texas, Revenue Bonds, Brazosport Memorial Hospital, Series 2004:
1,745 5.250%, 7/01/20 - RAAI Insured 7/14 at 100.00 AA 1,879,191
1,835 5.250%, 7/01/21 - RAAI Insured 7/14 at 100.00 AA 1,970,221
Gregg County Health Facilities Development Corporation, Texas,
Hospital Revenue Bonds, Good Shepherd Medical Center Project,
Series 2000:
2,000 6.875%, 10/01/20 - RAAI Insured 10/10 at 101.00 AA 2,339,740
3,250 6.375%, 10/01/25 - RAAI Insured 10/10 at 101.00 AA 3,719,657
1,500 Harris County Health Facilities Development Corporation, 8/11 at 100.00 AA- 1,608,255
Texas, Revenue Bonds, St. Luke's Episcopal Hospital,
Series 2001A, 5.500%, 2/15/21
2,000 Harris County Health Facilities Development Corporation, 6/11 at 101.00 A 2,201,020
Texas, Hospital Revenue Bonds, Memorial Hermann
Healthcare System, Series 2001A, 6.375%, 6/01/29
5,750 Midland County Hospital District, Texas, Hospital Revenue No Opt. Call BBB 4,072,093
Bonds, Series 1992, 0.000%, 6/01/11
2,000 North Central Texas Health Facilities Development 5/11 at 100.00 AA- 2,056,640
Corporation, Hospital Revenue Bonds, Baylor Healthcare
System, Series 2001A, 5.125%, 5/15/29
1,760 Parker County Hospital District, Texas, Hospital Revenue 8/09 at 102.00 BBB- 1,821,002
Bonds, Campbell Health System, Series 1999, 6.250%, 8/15/19
2,000 Richardson Hospital Authority, Texas, Revenue Bonds, 12/13 at 100.00 BBB 2,104,020
Richardson Regional Medical Center, Series 2004,
5.875%, 12/01/24
1,050 Tarrant County Health Facilities Development Corporation, 11/08 at 101.00 A 1,088,724
Texas, Hospital Revenue Bonds, Adventist Health System -
Sunbelt Obligated Group, Series 1998, 5.375%, 11/15/20
31
Nuveen Texas Quality Income Municipal Fund (NTX) (continued)
Portfolio of INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
HEALTHCARE (continued)
$ 3,500 Tarrant County Health Facilities Development Corporation, 11/10 at 101.00 A $ 3,914,995
Texas, Hospital Revenue Bonds, Adventist Health System -
Sunbelt Obligated Group, Series 2000, 6.625%, 11/15/20
2,000 Tom Green County Health Facilities Development Corporation, 5/11 at 101.00 Baa3 2,171,480
Texas, Hospital Revenue Bonds, Shannon Health System
Project, Series 2001, 6.750%, 5/15/21
1,000 Tyler Health Facilities Development Corporation, Texas, 7/12 at 100.00 Baa1 1,056,210
Hospital Revenue Bonds, Mother Frances Hospital Regional
Healthcare Center, Series 2001, 6.000%, 7/01/31
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 8.3% (5.7% OF TOTAL INVESTMENTS)
Bexar County Housing Finance Corporation, Texas, Insured
Multifamily Housing Revenue Bonds, Waters at Northern Hills
Apartments Project, Series 2001A:
2,000 6.000%, 8/01/31 - MBIA Insured 8/11 at 102.00 Aaa 2,100,400
750 6.050%, 8/01/36 - MBIA Insured 8/11 at 102.00 Aaa 787,830
Grand Prairie Housing Finance Corporation, Texas, GNMA
Multifamily Housing Revenue Bonds, Landings of Carrier Project,
Series 2000A:
1,000 6.650%, 9/20/22 9/10 at 105.00 AAA 1,117,840
2,030 6.750%, 9/20/28 9/10 at 105.00 AAA 2,245,099
5,668 Houston Housing Finance Corporation, Texas, GNMA 9/11 at 105.00 Aaa 6,044,412
Collateralized Mortgage Multifamily Housing Revenue
Bonds, RRG Apartments Project, Series 2001, 6.250%, 9/20/35
------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 5.4% (3.7% OF TOTAL INVESTMENTS)
2,800 El Paso Housing Finance Corporation, Texas, GNMA 4/11 at 106.75 AAA 2,984,632
Collateralized Single Family Mortgage Revenue Bonds,
Series 2001A-3, 6.180%, 4/01/33
205 Galveston Property Finance Authority Inc., Texas, Single 3/05 at 100.00 A3 205,588
Family Mortgage Revenue Bonds, Series 1991A,
8.500%, 9/01/11
200 Houston Housing Finance Corporation, Texas, Single Family 6/05 at 100.00 AAA 201,324
Mortgage Revenue Refunding Bonds, Series 1993A,
5.950%, 12/01/10 - FSA Insured
1,405 Texas Department of Housing, Single Family Mortgage 9/06 at 102.00 AAA 1,470,712
Revenue Bonds, Series 1996E, 6.000%, 9/01/17 -
MBIA Insured
2,930 Texas Department of Housing and Community Affairs, 3/12 at 100.00 AAA 3,039,318
Single Family Mortgage Bonds, Series 2002B,
5.550%, 9/01/33 (Alternative Minimum Tax) - MBIA Insured
130 Victoria Housing Finance Corporation, Texas, FNMA No Opt. Call Aaa 130,589
Single Family Mortgage Revenue Refunding Bonds,
Series 1995, 8.125%, 1/01/11
------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CARE - 7.2% (5.0% OF TOTAL INVESTMENTS)
Bell County Health Facilities Development Corporation,
Texas, Retirement Facility Revenue Bonds, Buckner Retirement
Services Inc. Obligated Group, Series 1998:
3,400 5.250%, 11/15/19 11/08 at 101.00 A- 3,497,852
5,000 5.250%, 11/15/28 11/08 at 101.00 A- 5,026,350
2,000 Tarrant County Health Facilities Development Corporation, 1/08 at 105.00 AAA 2,244,340
Texas, Tax-Exempt Mortgage Revenue Bonds, South Central
Nursing Homes Inc., Series 1997A, 6.000%, 1/01/37 -
MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
MATERIALS - 4.3% (3.0% OF TOTAL INVESTMENTS)
3,000 Cass County Industrial Development Corporation, Texas, 3/10 at 101.00 BBB 3,288,420
Environmental Improvement Revenue Bonds, International
Paper Company Project, Series 2000A, 6.600%, 3/15/24
(Alternative Minimum Tax)
3,000 Guadalupe-Blanco River Authority, Texas, Sewage and Solid 4/06 at 102.00 AA- 3,168,690
Waste Disposal Facility Bonds, E.I. DuPont de Nemours and
Company Project, Series 1996, 6.400%, 4/01/26 (Alternative
Minimum Tax)
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 31.6% (21.8% OF TOTAL INVESTMENTS)
4,130 Coppell Independent School District, Dallas County, 8/09 at 75.34 AAA 2,670,086
Texas, Unlimited Tax School Building and Refunding Bonds,
Series 1992, 0.000%, 8/15/14 - MBIA Insured
2,595 Denton County, Texas, Permanent Improvement General 7/12 at 100.00 AA 2,752,750
Obligation Bonds, Series 2005, 5.000%, 7/15/25
1,450 Donna Independent School District, Hidalgo County, Texas, 2/11 at 100.00 AAA 1,662,744
Unlimited Tax School Building Bonds, Series 2000,
6.000%, 2/15/17
32
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL (continued)
$ 1,750 El Paso County, Texas, Certificates of Obligation, Series 2001, 2/12 at 100.00 AAA $ 1,880,515
5.000%, 2/15/21 - FSA Insured
2,000 Harlingen Independent School District, Cameron County, 8/09 at 100.00 AAA 2,197,300
Texas, Unlimited Tax School Building Bonds, Series 1999,
5.650%, 8/15/29
Houston Community College, Texas, Limited Tax General
Obligation Bonds, Series 2003:
2,500 5.000%, 2/15/20 - AMBAC Insured 2/13 at 100.00 AAA 2,695,850
2,235 5.000%, 2/15/21 - AMBAC Insured 2/13 at 100.00 AAA 2,401,955
1,500 Judson Independent School District, Bexar County, Texas, 2/11 at 100.00 Aaa 1,643,415
General Obligation Refunding Bonds, Series 2002,
5.250%, 2/01/21
2,600 Klein Independent School District, Harris County, Texas, 8/09 at 100.00 AAA 2,789,618
Unlimited Tax Schoolhouse Bonds, Series 1999A,
5.000%, 8/01/18
5,220 Leander Independent School District, Williamson and 8/09 at 46.74 AAA 2,046,919
Travis Counties, Texas, Unlimited Tax School Building and
Refunding Bonds, Series 2000, 0.000%, 8/15/21
1,000 Mansfield Independent School District, Tarrant County, 2/14 at 100.00 AAA 1,080,330
Texas, General Obligation Bonds, Series 2004,
5.000%, 2/15/20
1,545 Montgomery County, Texas, General Obligation Refunding 9/07 at 72.39 AAA 1,007,773
Bonds, Series 1997, 0.000%, 3/01/14 - MBIA Insured
925 Northside Independent School District, Bexar County, 8/10 at 100.00 AAA 1,040,671
Texas, Unlimited Tax School Building and Refunding Bonds,
Series 2000, 5.875%, 8/15/25
500 Puerto Rico, General Obligation and Public Improvement No Opt. Call A- 568,370
Bonds, Series 2001A, 5.500%, 7/01/29
1,825 Socorro Independent School District, El Paso County, Texas, 2/06 at 100.00 Aaa 1,884,568
General Obligation Bonds, Series 1996, 5.750%, 2/15/21
1,440 South Texas Community College District, General Obligation 8/12 at 100.00 AAA 1,625,299
Bonds, Series 2002, 5.500%, 8/15/17 - AMBAC Insured
1,250 Southside Independent School District, Bexar County, Texas, 8/14 at 100.00 Aaa 1,344,700
General Obligation Bonds, Series 2004A, 5.000%, 8/15/22
1,140 Sunnyvale School District, Texas, General Obligation Bonds, 2/14 at 100.00 AAA 1,239,522
Series 2004, 5.250%, 2/15/25
2,000 Texas, General Obligation Bonds, Water Financial Assistance 8/11 at 100.00 Aa1 2,190,960
Program, Series 2001, 5.250%, 8/01/23
1,500 Texas, General Obligation Refunding Bonds, Public Finance 10/12 at 100.00 Aa1 1,630,725
Authority, Series 2002, 5.000%, 10/01/18
1,795 United Independent School District, Webb County, Texas, 8/12 at 100.00 AAA 2,011,244
Unlimited Tax School Building Bonds, Series 2000,
5.375%, 8/15/18
5,290 Weslaco Independent School District, Hidalgo County, Texas, 2/10 at 100.00 Aaa 5,764,566
General Obligation School Building Bonds, Series 2000,
5.500%, 2/15/25
West Texas Independent School District, McLennan and Hill
Counties, General Obligation Refunding Bonds, Series 1998:
1,000 0.000%, 8/15/22 8/13 at 61.20 AAA 405,490
1,000 0.000%, 8/15/24 8/13 at 54.88 AAA 360,560
1,800 Williamson County, Texas, General Obligation Bonds, 2/12 at 100.00 AAA 2,018,088
Series 2002, 5.500%, 2/15/16 - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 14.0% (9.7% OF TOTAL INVESTMENTS)
4,500 Austin, Texas, Subordinate Lien Hotel Occupancy Tax Revenue 11/09 at 100.00 AAA 5,012,865
Refunding Bonds, Series 1999, 5.800%, 11/15/29 -
AMBAC Insured
Bexar County, Texas, Combined Tax and Revenue Certificates
of Obligation, Series 2004:
1,235 5.000%, 6/15/17 6/14 at 100.00 AA 1,348,336
1,295 5.000%, 6/15/18 6/14 at 100.00 AA 1,409,595
1,260 5.000%, 6/15/19 6/14 at 100.00 AA 1,365,311
1,275 Copperas Cove, Texas, Certificates of Obligation, Series 2003, 8/12 at 100.00 AAA 1,361,279
5.000%, 8/15/23 - MBIA Insured
2,305 Corpus Christi, Texas, Combination Tax and Municipal Hotel 9/12 at 100.00 AAA 2,599,833
Occupancy Tax Revenue Certificates of Obligation,
Series 2002, 5.500%, 9/01/21 - FSA Insured
2,250 Harris County-Houston Sports Authority, Texas, Senior Lien 11/11 at 100.00 AAA 2,408,715
Revenue Bonds, Series 2001G, 5.250%, 11/15/22 -
MBIA Insured
1,000 Laredo, Texas, Sports Venue Sales Tax Revenue Bonds, 3/09 at 100.00 AAA 1,069,290
Series 2001, 5.300%, 3/15/26 - FGIC Insured
33
Nuveen Texas Quality Income Municipal Fund (NTX) (continued)
Portfolio of INVESTMENTS January 31, 2005 (Unaudited)
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED (continued)
$ 1,255 Pasadena, Texas, Certificates of Obligation, Series 2002, 4/11 at 100.00 AAA $ 1,354,672
5.125%, 4/01/24 - FGIC Insured
2,685 San Antonio, Texas, Hotel Occupancy Tax Revenue Bonds, 8/06 at 102.00 AAA 2,857,968
Henry B. Gonzalez Convention Center Project, Series 1996,
5.700%, 8/15/26 - FGIC Insured
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 3.3% (2.3% OF TOTAL INVESTMENTS)
1,000 Austin, Texas, Airport System Prior Lien Revenue Bonds, 11/13 at 100.00 AAA 1,108,610
Series 2003, 5.250%, 11/15/16 - MBIA Insured
2,600 Dallas-Ft. Worth International Airport Facility Improvement 11/09 at 101.00 Caa2 1,646,320
Corporation, Texas, Revenue Bonds, American Airlines Inc.,
Series 1999, 6.375%, 5/01/35 (Alternative Minimum Tax)
2,000 Houston, Texas, Subordinate Lien Airport System Revenue 7/10 at 100.00 AAA 2,178,120
Bonds, Series 2000A, 5.625%, 7/01/30 (Alternative
Minimum Tax) - FSA Insured
------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED *** - 11.2% (7.7% OF TOTAL INVESTMENTS)
160 Abilene Housing Development Corporation, Texas, No Opt. Call N/R*** 171,947
Section 8 First Lien Revenue Bonds, Abilene East
Apartments, Series 1978, 7.000%, 7/01/08
520 Puerto Rico, The Children's Trust Fund, Tobacco Settlement 7/10 at 100.00 AAA 560,414
Asset Backed Bonds, Series 2000, 5.750%, 7/01/20
(Pre-refunded to 7/01/10)
1,450 Galveston Industrial Development Corporation, Texas, Sales 9/05 at 100.00 AAA 1,480,653
Tax Revenue Bonds, Series 1995, 5.750%, 9/01/15
(Pre-refunded to 9/01/05) - AMBAC Insured
5,275 Houston, Texas, Junior Lien Water and Sewerage System 12/10 at 100.00 AAA 5,894,232
Revenue Refunding Bonds, Series 2000B, 5.250%, 12/01/30
(Pre-refunded to 12/01/10) - FGIC Insured
1,000 North Central Texas Health Facilities Development No Opt. Call AAA 1,182,120
Corporation, Hospital Revenue Bonds, Presbyterian
Healthcare System, Series 1996B, 5.750%, 6/01/26 -
MBIA Insured
1,075 Northside Independent School District, Bexar County, Texas, 8/10 at 100.00 AAA 1,231,327
Unlimited Tax School Building and Refunding Bonds,
Series 2000, 5.875%, 8/15/25 (Pre-refunded to 8/15/10)
2,500 Retama Development Corporation, Texas, Special Facilities 12/17 at 100.00 AAA 3,376,925
Revenue Bonds, Retama Park Racetrack, Series 1993,
8.750%, 12/15/18 (Pre-refunded to 12/15/17)
1,895 San Antonio, Texas, Hotel Occupancy Tax Revenue Bonds, 8/06 at 102.00 AAA 2,027,082
Henry B. Gonzalez Convention Center Project, Series 1996,
5.700%, 8/15/26 (Pre-refunded to 8/15/06) - FGIC Insured
665 San Antonio, Texas, Water System Revenue Refunding Bonds, No Opt. Call AAA 758,965
Series 1992, 6.500%, 5/15/10 - MBIA Insured
------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 8.2% (5.7% OF TOTAL INVESTMENTS)
2,560 Brazos River Authority, Texas, Pollution Control Revenue 4/13 at 101.00 BBB 3,054,669
Refunding Bonds, TXU Electric Company Project,
Series 1999C, 7.700%, 3/01/32 (Alternative Minimum Tax)
2,400 Brazos River Authority, Texas, Revenue Bonds, Reliant 4/09 at 101.00 BBB- 2,482,752
Energy Inc., Series 1999A, 5.375%, 4/01/19
2,000 Harris County Health Facilities Development Corporation, 2/10 at 100.00 AAA 2,188,320
Texas, Thermal Utility Revenue Bonds, TECO Project,
Series 2000, 5.750%, 2/15/15 (Alternative Minimum
Tax) - AMBAC Insured
1,500 Matagorda County Navigation District 1, Texas, Pollution 7/05 at 100.00 AAA 1,527,240
Control Revenue Refunding Bonds, Central Power and
Light Company Project, Series 1993, 6.000%, 7/01/28 -
MBIA Insured
1,000 Matagorda County Navigation District 1, Texas, Revenue 5/09 at 101.00 BBB- 1,012,890
Bonds, Reliant Energy Inc., Series 1999B, 5.950%, 5/01/30
(Alternative Minimum Tax)
1,750 San Antonio, Texas, Electric and Gas System Revenue 2/12 at 100.00 Aa1 1,945,265
Refunding Bonds, Series 2002, 5.375%, 2/01/20
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 10.9% (7.5% OF TOTAL INVESTMENTS)
Coastal Water Authority, Texas, Contract Revenue Bonds,
Houston Water Projects, Series 2004:
1,005 5.000%, 12/15/20 - FGIC Insured 12/14 at 100.00 AAA 1,091,812
1,030 5.000%, 12/15/21 - FGIC Insured 12/14 at 100.00 AAA 1,115,469
3,000 Houston, Texas, First Lien Combined Utility System Revenue 5/14 at 100.00 AAA 3,304,290
Bonds, Series 2004A, 5.250%, 5/15/23 - FGIC Insured
3,500 Houston, Texas, Junior Lien Water and Sewerage System 12/11 at 100.00 AAA 3,953,740
Revenue Refunding Bonds, Series 2001A, 5.500%, 12/01/17 -
FSA Insured
34
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT (000) DESCRIPTION(1) PROVISIONS* RATINGS** VALUE
------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER (continued)
Irving, Texas, Subordinate Lien Waterworks and Sewerage
Revenue Bonds, Series 2004:
$ 1,680 5.000%, 8/15/22 - AMBAC Insured 8/14 at 100.00 AAA $ 1,807,277
1,760 5.000%, 8/15/23 - AMBAC Insured 8/14 at 100.00 AAA 1,887,582
1,260 Rowlett, Rockwall and Dallas Counties, Texas, Waterworks 3/14 at 100.00 AAA 1,350,670
and Sewerage System Revenue Bonds, Series 2004A,
5.000%, 3/01/22 - MBIA Insured
1,500 Texas Water Development Board, Senior Lien State Revolving 7/09 at 100.00 AAA 1,644,071
Fund Revenue Bonds, Series 1999A, 5.500%, 7/15/21
------------------------------------------------------------------------------------------------------------------------------------
$ 208,748 Total Long-Term Investments (cost $199,916,477) - 144.8% 215,300,693
=============-----------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.6% 2,371,116
--------------------------------------------------------------------------------------------------------------------
Preferred Shares, at Liquidation Value - (46.4)% (69,000,000)
--------------------------------------------------------------------------------------------------------------------
Net Assets Applicable to Common Shares - 100% $ 148,671,809
====================================================================================================================
(1) All percentages shown in the Portfolio of Investments
are based on net assets applicable to Common shares
unless otherwise noted.
* Optional Call Provisions: Dates (month and year) and
prices of the earliest optional call or redemption.
There may be other call provisions at varying prices at
later dates.
** Ratings: Using the higher of Standard & Poor's or
Moody's rating.
*** Securities are backed by an escrow or trust containing
sufficient U.S. Government or U.S. Government agency
securities which ensures the timely payment of
principal and interest. Such securities are normally
considered to be equivalent to AAA rated securities.
N/R Investment is not rated.
See accompanying notes to financial statements.
35
Statement of
ASSETS AND LIABILITIES January 31, 2005 (Unaudited)
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $88,790,839,
$33,571,712, $52,124,847, $64,469,098,
and $199,916,477, respectively) $94,812,517 $35,653,224 $55,845,706 $67,256,823 $215,300,693
Cash 80,006 250,482 672,231 37,541 --
Receivables:
Interest 701,840 288,262 419,732 472,598 3,617,027
Investments sold -- -- -- -- 1,000,000
Other assets 1,804 1,852 3,585 8,631 2,977
------------------------------------------------------------------------------------------------------------------------------------
Total assets 95,596,167 36,193,820 56,941,254 67,775,593 219,920,697
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft -- -- -- -- 2,065,322
Forward swaps, at value -- 73,274 176,689 285,284 --
Accrued expenses:
Management fees 51,832 10,462 16,412 18,380 117,191
Other 48,098 8,111 11,210 7,891 50,555
Preferred share dividends payable 4,930 2,366 4,588 7,638 15,820
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 104,860 94,213 208,899 319,193 2,248,888
------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value 30,000,000 12,000,000 18,500,000 22,000,000 69,000,000
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $65,491,307 $24,099,607 $38,232,355 $45,456,400 $148,671,809
====================================================================================================================================
Common shares outstanding 4,455,066 1,544,931 2,422,341 3,067,243 9,477,520
====================================================================================================================================
Net asset value per Common share outstanding
(net assets applicable to Common shares,
divided by Common shares outstanding) $ 14.70 $ 15.60 $ 15.78 $ 14.82 $ 15.69
====================================================================================================================================
NET ASSETS APPLICABLE TO COMMON SHARES CONSIST OF:
------------------------------------------------------------------------------------------------------------------------------------
Common shares, $.01 par value per share $ 44,551 $ 15,449 $ 24,223 $ 30,672 $ 94,775
Paid-in surplus 61,943,896 21,846,926 34,310,263 43,241,324 134,328,306
Undistributed net investment income 190,816 231,565 169,078 90,558 1,346,540
Accumulated net realized gain (loss)
from investments
and forward swaps (2,709,634) (2,571) 184,621 (408,595) (2,482,028)
Net unrealized appreciation
(depreciation) of investments
and forward swaps 6,021,678 2,008,238 3,544,170 2,502,441 15,384,216
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common shares $65,491,307 $24,099,607 $38,232,355 $45,456,400 $148,671,809
====================================================================================================================================
Authorized shares:
Common 200,000,000 Unlimited Unlimited Unlimited Unlimited
Preferred 1,000,000 Unlimited Unlimited Unlimited Unlimited
====================================================================================================================================
See accompanying notes to financial statements.
36
Statement of
OPERATIONS Six Months Ended January 31, 2005 (Unaudited)
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME $2,312,826 $ 853,933 $1,327,736 $1,539,086 $5,604,508
------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees 305,652 116,067 182,288 215,455 693,499
Preferred shares - auction fees 37,808 15,123 23,315 27,725 86,958
Preferred shares - dividend disbursing agent fees 5,042 5,042 5,042 5,042 10,081
Shareholders' servicing agent fees and expenses 2,963 201 224 98 7,678
Custodian's fees and expenses 13,418 5,900 9,389 8,395 24,213
Directors'/Trustees' fees and expenses 1,351 517 806 884 2,838
Professional fees 5,829 5,059 5,589 5,687 8,106
Shareholders' reports - printing and
mailing expenses 7,185 2,265 3,509 4,904 12,610
Stock exchange listing fees 5,529 66 104 128 5,503
Investor relations expense 5,400 2,416 3,769 4,329 12,587
Other expenses 6,037 4,548 5,087 6,149 7,838
------------------------------------------------------------------------------------------------------------------------------------
Total expenses before custodian fee credit
and expense reimbursement 396,214 157,204 239,122 278,796 871,911
Custodian fee credit (5,655) (2,202) (1,778) (3,637) (11,316)
Expense reimbursement -- (54,108) (84,979) (107,137) --
------------------------------------------------------------------------------------------------------------------------------------
Net expenses 390,559 100,894 152,365 168,022 860,595
------------------------------------------------------------------------------------------------------------------------------------
Net investment income 1,922,267 753,039 1,175,371 1,371,064 4,743,913
------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain from investments 282,644 17,430 234,239 28,867 273,015
Net realized gain (loss) from forward swaps -- (19,865) (49,915) (89,813) --
Change in net unrealized appreciation
(depreciation) of investments 2,849,836 1,089,073 1,899,238 2,791,251 5,391,576
Change in net unrealized appreciation
(depreciation) of forward swaps -- (73,274) (176,689) (285,284) --
------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain 3,132,480 1,013,364 1,906,873 2,445,021 5,664,591
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS
From net investment income (147,955) (57,707) (78,659) (109,175) (473,571)
From accumulated net realized
gains from investments -- (4,003) (19,342) -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Preferred shareholders (147,955) (61,710) (98,001) (109,175) (473,571)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable
to Common shares
from operations $4,906,792 $1,704,693 $2,984,243 $3,706,910 $9,934,933
====================================================================================================================================
See accompanying notes to financial statements.
37
Statement of
CHANGES IN NET ASSETS (Unaudited)
ARIZONA ARIZONA ARIZONA
PREMIUM INCOME (NAZ) DIVIDEND ADVANTAGE (NFZ) DIVIDEND ADVANTAGE 2 (NKR)
---------------------------- ---------------------------- -----------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
1/31/05 7/31/04 1/31/05 7/31/04 1/31/05 7/31/04
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 1,922,267 $ 4,078,915 $ 753,039 $ 1,530,494 $ 1,175,371 $ 2,320,417
Net realized gain (loss)
from investments 282,644 713,547 17,430 108,890 234,239 307,836
Net realized gain (loss) from
forward swaps -- -- (19,865) -- (49,915) --
Change in net unrealized
appreciation (depreciation)
of investments 2,849,836 1,137,949 1,089,073 760,107 1,899,238 1,008,021
Change in net unrealized
appreciation (depreciation)
of forward swaps -- -- (73,274) -- (176,689) --
Distributions to
Preferred Shareholders:
From net investment income (147,955) (230,103) (57,707) (85,893) (78,659) (146,950)
From accumulated net
realized gains
from investments -- -- (4,003) (4,168) (19,342) (9,227)
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net
assets applicable
to Common shares
from operations 4,906,792 5,700,308 1,704,693 2,309,430 2,984,243 3,480,097
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
COMMON SHAREHOLDERS
From net investment income (1,961,146) (4,076,294) (708,949) (1,410,436) (1,045,613) (2,091,535)
From accumulated net
realized gains
from investments -- -- (67,355) (64,486) (288,186) (105,537)
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets
applicable to
Common shares
from distributions
to Common shareholders (1,961,146) (4,076,294) (776,304) (1,474,922) (1,333,799) (2,197,072)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions 114,195 260,642 18,443 27,858 38,949 23,870
Preferred shares offering costs -- -- -- -- -- (1,409)
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets applicable
to Common shares
from capital share transactions 114,195 260,642 18,443 27,858 38,949 22,461
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
applicable to Common shares 3,059,841 1,884,656 946,832 862,366 1,689,393 1,305,486
Net assets applicable to Common
shares at the beginning
of period 62,431,466 60,546,810 23,152,775 22,290,409 36,542,962 35,237,476
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $65,491,307 $62,431,466 $24,099,607 $23,152,775 $38,232,355 $36,542,962
====================================================================================================================================
Undistributed net
investment income
at the end of period $ 190,816 $ 377,650 $ 231,565 $ 245,182 $ 169,078 $ 117,979
====================================================================================================================================
See accompanying notes to financial statements.
38
ARIZONA TEXAS
DIVIDEND ADVANTAGE 3 (NXE) QUALITY INCOME (NTX)
----------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
1/31/05 7/31/04 1/31/05 7/31/04
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income $ 1,371,064 $ 2,721,867 $ 4,743,913 $ 9,753,219
Net realized gain (loss) from investments 28,867 (276,088) 273,015 1,077,835
Net realized gain (loss) from
forward swaps (89,813) -- -- --
Change in net unrealized appreciation
(depreciation) of investments 2,791,251 1,955,972 5,391,576 4,038,575
Change in net unrealized appreciation
(depreciation) of forward swaps (285,284) -- -- --
Distributions to Preferred Shareholders:
From net investment income (109,175) (185,513) (473,571) (628,703)
From accumulated net realized gains
from investments -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets applicable
to Common shares from operations 3,706,910 4,216,238 9,934,933 14,240,926
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO COMMON SHAREHOLDERS
From net investment income (1,233,031) (2,465,996) (4,548,144) (9,093,044)
From accumulated net realized gains
from investments -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets applicable to
Common shares from distributions
to Common shareholders (1,233,031) (2,465,996) (4,548,144) (9,093,044)
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from Common shares
issued to shareholders due to
reinvestment of distributions -- 3,508 51,944 110,085
Preferred shares offering costs -- (18,271) -- --
------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
applicable to Common shares
from capital share transactions -- (14,763) 51,944 110,085
------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
applicable to Common shares 2,473,879 1,735,479 5,438,733 5,257,967
Net assets applicable to Common
shares at the beginning of period 42,982,521 41,247,042 143,233,076 137,975,109
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common
shares at the end of period $45,456,400 $42,982,521 $148,671,809 $143,233,076
====================================================================================================================================
Undistributed net investment income
at the end of period $ 90,558 $ 61,700 $ 1,346,540 $ 1,624,342
====================================================================================================================================
See accompanying notes to financial statements.
39
Notes to
FINANCIAL STATEMENTS (Unaudited)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The state funds (the "Funds") covered in this report and their corresponding
common share stock exchange symbols are Nuveen Arizona Premium Income Municipal
Fund, Inc. (NAZ), Nuveen Arizona Dividend Advantage Municipal Fund (NFZ), Nuveen
Arizona Dividend Advantage Municipal Fund 2 (NKR), Nuveen Arizona Dividend
Advantage Municipal Fund 3 (NXE) and Nuveen Texas Quality Income Municipal Fund
(NTX). Common shares of Arizona Premium Income (NAZ) and Texas Quality Income
(NTX) are traded on the New York Stock Exchange while Common shares of Arizona
Dividend Advantage (NFZ), Arizona Dividend Advantage 2 (NKR) and Arizona
Dividend Advantage 3 (NXE) are traded on the American Stock Exchange. The Funds
are registered under the Investment Company Act of 1940, as amended, as
closed-end management investment companies.
Each Fund seeks to provide current income exempt from both regular federal and
designated state income taxes, where applicable, by investing primarily in a
diversified portfolio of municipal obligations issued by state and local
government authorities within a single state.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with U.S.
generally accepted accounting principles.
Investment Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Directors/Trustees. When
price quotes are not readily available (which is usually the case for municipal
securities), the pricing service establishes fair market value based on yields
or prices of municipal bonds of comparable quality, type of issue, coupon,
maturity and rating, indications of value from securities dealers, evaluations
of anticipated cash flows or collateral and general market conditions. Prices of
derivative investments are also provided by an independent pricing service
approved by each Fund's Board of Directors/Trustees. If the pricing service is
unable to supply a price for a derivative investment each Fund may use a market
quote provided by a major broker/dealer in such investments. If it is determined
that market prices for an investment are unavailable or inappropriate, the Board
of Directors/Trustees of the Funds, or its designee, may establish a fair value
for the investment. Temporary investments in securities that have variable rate
and demand features qualifying them as short-term securities are valued at
amortized cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from transactions are determined on the specific identification method.
Securities purchased on a when-issued or delayed delivery basis may have
extended settlement periods. Any securities so purchased are subject to market
fluctuation during this period. The Funds have instructed the custodian to
segregate assets with a current value at least equal to the amount of the
when-issued and delayed delivery purchase commitments. At January 31, 2005,
there were no such outstanding purchase commitments in any of the Funds.
Investment Income
Interest income, which includes the amortization of premiums and accretion of
discounts for financial reporting purposes, is recorded on an accrual basis.
Investment income also includes paydown gains and losses, if any.
Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to distribute substantially all net investment income and net capital
gains to shareholders and to otherwise comply with the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies. Therefore, no federal income tax provision is required. Furthermore,
each Fund intends to satisfy conditions which will enable interest from
municipal securities, which is exempt from regular federal and state income
taxes, where applicable, to retain such tax-exempt status when distributed to
shareholders of the Funds. Net realized capital gains and ordinary income
distributions paid by the Funds are subject to federal taxation.
Dividends and Distributions to Common Shareholders
Dividends from tax-exempt net investment income are declared monthly. Net
realized capital gains and/or market discount from investment transactions, if
any, are distributed to shareholders not less frequently than annually.
Furthermore, capital gains are distributed only to the extent they exceed
available capital loss carryforwards.
40
Distributions to Common shareholders of tax-exempt net investment income, net
realized capital gains and/or market discount, if any, are recorded on the
ex-dividend date. The amount and timing of distributions are determined in
accordance with federal income tax regulations, which may differ from U.S.
generally accepted accounting principles.
Preferred Shares
The Funds have issued and outstanding Preferred shares, $25,000 stated value per
share, as a means of effecting financial leverage. Each Fund's Preferred shares
are issued in one or more Series. The dividend rate on each Series is determined
every seven days, pursuant to a dutch auction process overseen by the auction
agent, and is payable weekly at the end of each rate period. The number of
Preferred shares outstanding, by Series and in total, for each Fund is as
follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
---------------------------------------------------------------------------------------------------------
Number of shares:
Series M -- -- -- 880 760
Series T -- 480 -- -- --
Series W -- -- 740 -- --
Series TH 1,200 -- -- -- 2,000
---------------------------------------------------------------------------------------------------------
Total 1,200 480 740 880 2,760
=========================================================================================================
Forward Swap Transactions
The Funds may invest in certain derivative financial instruments. The Funds' use
of forward interest rate swap transactions is intended to mitigate the negative
impact that an increase in long-term interest rates could have on Common share
net asset value. Forward interest rate swap transactions involve each Fund's
agreement with the counterparty to pay, in the future, a fixed rate payment in
exchange for the counterparty paying the Fund a variable rate payment. The
amount of the payment obligation is based on the notional amount of the forward
swap contract. The Funds may close out a contract prior to the effective date at
which point a realized gain or loss would be recognized. When a forward swap is
terminated, it does not involve the delivery of securities or other underlying
assets or principal, but rather is settled in cash. Each Fund intends, but is
not obligated to, terminate its forward swaps before the effective date.
Accordingly, the risk of loss with respect to the swap counterparty on such
transactions is limited to the credit risk associated with a counterparty
failing to honor its commitment to pay any realized gain to the Fund upon
termination. To minimize such credit risk, all counterparties are required to
pledge collateral daily (based on the daily valuation of each swap) on behalf of
each Fund with a value approximately equal to the amount of any unrealized gain
above a pre-determined threshold. Reciprocally, when any of the Funds have an
unrealized loss on a swap contract, the Funds have instructed the custodian to
pledge assets of the Funds as collateral with a value approximately equal to the
amount of the unrealized loss above a pre-determined threshold. Collateral
pledges are monitored and subsequently adjusted if and when the swap valuations
fluctuate, either up or down, by at least the pre-determined threshold amount.
Custodian Fee Credit
Each Fund has an arrangement with the custodian bank whereby certain custodian
fees and expenses are reduced by credits earned on each Fund's cash on deposit
with the bank. Such deposit arrangements are an alternative to overnight
investments.
Indemnifications
Under the Funds' organizational documents, its Officers and Directors/Trustees
are indemnified against certain liabilities arising out of the performance of
their duties to the Funds. In addition, in the normal course of business, the
Funds enter into contracts that provide general indemnifications to other
parties. The Funds' maximum exposure under these arrangements is unknown as this
would involve future claims that may be made against the Funds that have not yet
occurred. However, the Funds have not had prior claims or losses pursuant to
these contracts and expect the risk of loss to be remote.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
41
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
2. FUND SHARES
Transactions in Common shares were as follows:
ARIZONA PREMIUM ARIZONA DIVIDEND ARIZONA DIVIDEND
INCOME (NAZ) ADVANTAGE (NFZ) ADVANTAGE 2 (NKR)
------------------------ ------------------------ ------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
1/31/05 7/31/04 1/31/05 7/31/04 1/31/05 7/31/04
---------------------------------------------------------------------------------------------------------
Common shares issued to
shareholders due to
reinvestment of
distributions 7,236 16,782 1,172 1,617 2,463 1,607
=========================================================================================================
ARIZONA DIVIDEND TEXAS QUALITY
ADVANTAGE 3 (NXE) INCOME (NTX)
------------------------ ------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
1/31/05 7/31/04 1/31/05 7/31/04
---------------------------------------------------------------------------------------------------------
Common shares issued to
shareholders due to
reinvestment of distributions -- 243 3,329 7,303
=========================================================================================================
3. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in long-term municipal
securities during the six months ended January 31, 2005, were as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
-------------------------------------------------------------------------------------------------------------
Purchases $8,392,468 $1,510,065 $3,448,912 $3,881,680 $14,104,643
Sales and maturities 8,215,735 1,434,841 3,985,359 3,406,610 11,273,500
=============================================================================================================
4. INCOME TAX INFORMATION
The following information is presented on an income tax basis. Differences
between amounts for financial statement and federal income tax purposes are
primarily due to the treatment of paydown gains and losses on investments,
timing differences in recognizing income on taxable market discount securities
and timing differences in recognizing certain gains and losses on security
transactions.
At January 31, 2005, the cost of investments was as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------
Cost of investments $88,774,400 $33,567,131 $52,124,059 $64,467,930 $199,826,065
============================================================================================================
42
Gross unrealized appreciation and gross unrealized depreciation of investments
at January 31, 2005, were as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
------------------------------------------------------------------------------------------------------------
Gross unrealized:
Appreciation $6,271,541 $2,093,851 $3,747,140 $2,788,893 $16,339,075
Depreciation (233,424) (7,758) (25,493) -- (864,447)
------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
of investments $6,038,117 $2,086,093 $3,721,647 $2,788,893 $15,474,628
============================================================================================================
The tax components of undistributed net investment income and net realized gains
at July 31, 2004, the Funds' last fiscal year end, were as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
---------------------------------------------------------------------------------------------------------
Undistributed net tax-exempt income * $704,535 $360,168 $292,499 $266,693 $2,277,128
Undistributed net ordinary income ** -- -- -- 1,432 14,741
Undistributed net long-term capital gains -- 71,222 307,825 -- --
=========================================================================================================
* Undistributed net tax exempt income (on a tax basis) has not been reduced
for the dividend declared on July 1, 2004, paid on August 2, 2004.
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
The tax character of distributions paid during the fiscal year ended July 31,
2004, the Funds' last fiscal year end, was designated for purposes of the
dividends paid deduction as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
-----------------------------------------------------------------------------------------------------------
Distributions from net
tax-exempt income $4,307,222 $1,494,232 $2,236,394 $2,650,674 $9,723,403
Distributions from net
ordinary income ** -- 68,654 110,761 -- --
Distributions from net
long-term capital gains -- -- 5,257 -- --
===========================================================================================================
** Net ordinary income consists of taxable market discount income and net
short-term capital gains, if any.
At July 31, 2004, the Funds' last fiscal year end, the following Funds had
unused capital loss carryforwards available for federal income tax purposes to
be applied against future capital gains, if any. If not applied, the
carryforwards will expire as follows:
ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND QUALITY
INCOME ADVANTAGE 3 INCOME
(NAZ) (NXE) (NTX)
---------------------------------------------------------------------------------------------------------
Expiration year:
2010 $ 2,164 $-- $--
2011 1,436,486 -- 855,431
2012 1,553,628 205,820 1,901,823
---------------------------------------------------------------------------------------------------------
Total $2,992,278 $205,820 $2,757,254
=========================================================================================================
Arizona Dividend Advantage 3 (NXE) elected to defer net realized losses from
investments incurred from November 1, 2003 through July 31, 2004 ("post-October
losses"), in accordance with Federal income tax regulations. Post-October losses
of $142,044 were treated as having arisen on the first day of the current fiscal
year.
43
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
5. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Effective January 1, 2005, Nuveen Advisory Corp. ("NAC"), the Funds' previous
Adviser, and its affiliate, Nuveen Institutional Advisory Corp. ("NIAC"), were
merged into Nuveen Asset Management ("NAM"), each wholly owned subsidiaries of
Nuveen Investments, Inc. ("Nuveen"). As a result of the merger, NAM is now the
Adviser to all funds previously advised by either NAC or NIAC.
As approved by the Board of Trustees, effective August 1, 2004, a complex-wide
management fee structure was adopted for all funds sponsored by the Adviser, or
its predecessor, and its affiliates. This fee structure separates each fund's
management fee into two components - a complex-level component, based on the
aggregate amount of all fund assets managed by the Adviser and its affiliates,
and a specific fund-level component, based only on the amount of assets within
each individual fund. This pricing structure enables Nuveen fund shareholders to
benefit from growth in the assets within each individual fund as well as from
growth in the amount of complex-wide assets managed by the Adviser and its
affiliates. Under no circumstances will this pricing structure result in a fund
paying management fees at a rate higher than would otherwise have been
applicable had the complex-wide management fee structure not been implemented.
As a consequence of this new management fee structure, the funds' effective
management fees were reduced by approximately .009% as of February 28, 2005.
Effective August 1, 2004, the annual fund-level fee, payable monthly, for each
of the Funds is based upon the average daily net assets (including net assets
attributable to Preferred shares) of each Fund as follows:
AVERAGE DAILY NET ASSETS ARIZONA PREMIUM INCOME (NAZ)
(INCLUDING NET ASSETS TEXAS QUALITY INCOME (NTX)
ATTRIBUTABLE TOPREFERRED SHARES) FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $125 million .4500%
For the next $125 million .4375
For the next $250 million .4250
For the next $500 million .4125
For the next $1 billion .4000
For the next $3 billion .3875
For net assets over $5 billion .3750
================================================================================
ARIZONA DIVIDEND ADVANTAGE (NFZ)
AVERAGE DAILY NET ASSETS ARIZONA DIVIDEND ADVANTAGE 2 (NKR)
(INCLUDING NET ASSETS ARIZONA DIVIDEND ADVANTAGE 3 (NXE)
ATTRIBUTABLE TOPREFERRED SHARES) FUND-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $125 million .4500%
For the next $125 million .4375
For the next $250 million .4250
For the next $500 million .4125
For the next $1 billion .4000
For net assets over $2 billion .3750
================================================================================
44
Effective August 1, 2004, the annual complex-level fee, payable monthly, which
is additive to the fund-level fee, for all Nuveen sponsored funds in the U.S.,
is based on the aggregate amount of total fund assets managed as follows:
COMPLEX-LEVEL ASSETS(1) COMPLEX-LEVEL FEE RATE
--------------------------------------------------------------------------------
For the first $55 billion .2000%
For the next $1 billion .1800
For the next $1 billion .1600
For the next $3 billion .1425
For the next $3 billion .1325
For the next $3 billion .1250
For the next $5 billion .1200
For the next $5 billion .1175
For the next $15 billion .1150
For Managed Assets over $91 billion (2) .1400
================================================================================
(1) The complex-level fee component of the management fee for the funds is
calculated based upon the aggregate Managed Assets ("Managed Assets" means
the average daily net assets of each fund including assets attributable to
all types of leverage used by the Nuveen funds) of Nuveen-sponsored funds
in the U.S.
(2) With respect to the complex-wide Managed Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined at a later
date. In the unlikely event that complex-wide Managed Assets reach $91
billion prior to a determination of the complex-level fee rate or rates to
be applied to Managed Assets in excess of $91 billion, the complex-level
fee rate for such complex-wide Managed Assets shall be .1400% until such
time as a different rate or rates is determined.
Each Fund paid through July 31, 2004, an annual management fee, payable monthly,
at the rates set forth below, which were based upon the average daily net assets
(including net assets attributable to Preferred shares) of each Fund as follows:
AVERAGE DAILY NET ASSETS ARIZONA PREMIUM INCOME (NAZ)
(INCLUDING NET ASSETS TEXAS QUALITY INCOME (NTX)
ATTRIBUTABLE TOPREFERRED SHARES) MANAGEMENT FEE RATE
--------------------------------------------------------------------------------
For the first $125 million .6500%
For the next $125 million .6375
For the next $250 million .6250
For the next $500 million .6125
For the next $1 billion .6000
For the next $3 billion .5875
For net assets over $5 billion .5750
================================================================================
ARIZONA DIVIDEND ADVANTAGE (NFZ)
AVERAGE DAILY NET ASSETS ARIZONA DIVIDEND ADVANTAGE 2 (NKR)
(INCLUDING NET ASSETS ARIZONA DIVIDEND ADVANTAGE 3 (NXE)
ATTRIBUTABLE TOPREFERRED SHARES) MANAGEMENT FEE RATE
--------------------------------------------------------------------------------
For the first $125 million .6500%
For the next $125 million .6375
For the next $250 million .6250
For the next $500 million .6125
For the next $1 billion .6000
For net assets over $2 billion .5750
================================================================================
The management fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Funds pay no
compensation directly to those of its Directors/Trustees who are affiliated with
the Adviser or to their officers, all of whom receive remuneration for their
services to the Funds from the Adviser or its affiliates. The Board of
Directors/Trustees has adopted a deferred compensation plan for independent
Directors/Trustees that enables Directors/Trustees to elect to defer receipt of
all or a portion of the annual compensation they are entitled to receive from
certain Nuveen advised Funds. Under the plan, deferred amounts are treated as
though equal dollar amounts had been invested in shares of select Nuveen advised
Funds.
45
Notes to
FINANCIAL STATEMENTS (Unaudited) (continued)
For the first ten years of Arizona Dividend Advantage's (NFZ) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily net
assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
JANUARY 31, JANUARY 31,
--------------------------------------------------------------------------------
2001* .30% 2007 .25%
2002 .30 2008 .20
2003 .30 2009 .15
2004 .30 2010 .10
2005 .30 2011 .05
2006 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Arizona Dividend Advantage (NFZ) for any
portion of its fees and expenses beyond January 31, 2011.
For the first ten years of Arizona Dividend Advantage 2's (NKR) operations, the
Adviser has agreed to reimburse the Fund, as a percentage of average daily net
assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
MARCH 31, MARCH 31,
--------------------------------------------------------------------------------
2002* .30% 2008 .25%
2003 .30 2009 .20
2004 .30 2010 .15
2005 .30 2011 .10
2006 .30 2012 .05
2007 .30
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Arizona Dividend Advantage 2 (NKR) for
any portion of its fees and expenses beyond March 31, 2012.
For the first eight years of Arizona Dividend Advantage 3's (NXE) operations,
the Adviser has agreed to reimburse the Fund, as a percentage of average daily
net assets (including net assets attributable to Preferred shares), for fees and
expenses in the amounts and for the time periods set forth below:
YEAR ENDING YEAR ENDING
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------------------------------------
2002* .32% 2007 .32%
2003 .32 2008 .24
2004 .32 2009 .16
2005 .32 2010 .08
2006 .32
================================================================================
* From the commencement of operations.
The Adviser has not agreed to reimburse Arizona Dividend Advantage 3 (NXE) for
any portion of its fees and expenses beyond September 30, 2010.
46
6. SUBSEQUENT EVENTS
Distributions to Common Shareholders
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid on March 1, 2005, to shareholders of record on
February 15, 2005, as follows:
ARIZONA ARIZONA ARIZONA ARIZONA TEXAS
PREMIUM DIVIDEND DIVIDEND DIVIDEND QUALITY
INCOME ADVANTAGE ADVANTAGE 2 ADVANTAGE 3 INCOME
(NAZ) (NFZ) (NKR) (NXE) (NTX)
----------------------------------------------------------------------------------------------------------
Dividend per share $.0710 $.0765 $.0720 $.0670 $.0800
==========================================================================================================
Announcement Regarding Parent Company of Adviser
Recently, The St. Paul Travelers Companies, Inc. announced that it intended to
explore strategic alternatives to divest its equity stake in Nuveen. This
divestiture could take the form of a sale by The St. Paul Travelers Companies,
Inc. of its interest in Nuveen to another party or the form of the sale of its
interest to the public in a registered, broadly disseminated offering. Any
resulting divestiture could be deemed to be an "assignment" (as defined in the
1940 Act) of the investment management agreement between the Fund and NAM and
the investment sub-advisory agreement between NAM and Gateway, which would
result in the automatic termination of each agreement. The Board of
Directors/Trustees thereupon may consider both an interim investment management
agreement and interim investment sub-advisory agreement (as permitted under the
1940 Act) and new ongoing investment management and investment sub-advisory
agreements. If approved by the Board, the new ongoing agreements would be
presented to the Funds' shareholders for approval, and would take effect upon
such approval. There can be no assurance that these approvals will be obtained.
47
Financial
HIGHLIGHTS (Unaudited)
Selected data for a Common share outstanding throughout each period:
Investment Operations Less Distributions
----------------------------------------------------------------- -------------------------------
Distributions Distributions
from Net from Net
Beginning Investment Capital Investment Capital
Common Net Income to Gains to Income to Gains to
Share Net Realized/ Preferred Preferred Common Common
Net Asset Investment Unrealized Share- Share- Share- Share-
Value Income Gain (Loss) holders+ holders+ Total holders holders Total
====================================================================================================================================
ARIZONA PREMIUM
INCOME (NAZ)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) $14.04 $ .43 $ .70 $(.03) $ -- $1.10 $ (.44) $ -- $ (.44)
2004 13.66 .92 .43 (.05) -- 1.30 (.92) -- (.92)
2003 14.25 .97 (.57) (.07) -- .33 (.92) -- (.92)
2002 14.77 1.07 (.57) (.09) (.01) .40 (.88) (.04) (.92)
2001 14.25 1.09 .50 (.23) -- 1.36 (.83) (.01) (.84)
2000 14.90 1.06 (.61) (.25) -- .20 (.85) -- (.85)
ARIZONA DIVIDEND
ADVANTAGE (NFZ)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) 15.00 .49 .65 (.04) -- 1.10 (.46) (.04) (.50)
2004 14.45 .99 .57 (.06) -- 1.50 (.91) (.04) (.95)
2003 14.81 1.00 (.38) (.07) (.01) .54 (.88) (.04) (.92)
2002 14.37 1.04 .36 (.11) -- 1.29 (.84) (.01) (.85)
2001(a) 14.33 .44 .23 (.08) -- .59 (.35) -- (.35)
ARIZONA DIVIDEND
ADVANTAGE 2 (NKR)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) 15.10 .49 .78 (.03) (.01) 1.23 (.43) (.12) (.55)
2004 14.57 .96 .53 (.06) -- 1.43 (.86) (.04) (.90)
2003 14.88 .96 (.31) (.08) -- .57 (.86) (.01) (.87)
2002(b) 14.33 .24 .71 (.02) -- .93 (.22) -- (.22)
ARIZONA DIVIDEND
ADVANTAGE 3 (NXE)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) 14.01 .45 .80 (.04) -- 1.21 (.40) -- (.40)
2004 13.45 .89 .54 (.06) -- 1.37 (.80) -- (.80)
2003(c) 14.33 .66 (.67) (.05) -- (.06) (.61) -- (.61)
TEXAS QUALITY
INCOME (NTX)
------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) 15.12 .50 .60 (.05) -- 1.05 (.48) -- (.48)
2004 14.57 1.03 .55 (.07) -- 1.51 (.96) -- (.96)
2003 15.14 1.05 (.58) (.08) -- .39 (.95) (.01) (.96)
2002 15.16 1.11 (.02) (.10) (.02) .97 (.92) (.07) (.99)
2001 14.26 1.16 .88 (.27) -- 1.77 (.87) -- (.87)
2000 15.13 1.16 (.74) (.27) (.02) .13 (.91) (.09) (1.00)
====================================================================================================================================
Total Returns
----------------------
Based
Offering on
Costs and Ending Common
Preferred Common Based Share
Share Share Ending on Net
Underwriting Net Asset Market Market Asset
Discounts Value Value Value** Value**
===========================================================================================
ARIZONA PREMIUM
INCOME (NAZ)
-------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) $ -- $14.70 $15.8200 6.50% 7.93%
2004 -- 14.04 15.2700 7.97 9.66
2003 -- 13.66 15.0000 (5.98) 2.21
2002 -- 14.25 16.9000 9.63 2.88
2001 -- 14.77 16.3200 17.77 9.74
2000 -- 14.25 14.6250 (8.80) 1.61
ARIZONA DIVIDEND
ADVANTAGE (NFZ)
-------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) -- 15.60 16.6000 11.25 7.44
2004 -- 15.00 15.4000 7.05 10.56
2003 .02 14.45 15.3000 3.06 3.67
2002 -- 14.81 15.7500 6.38 9.32
2001(a) (.20) 14.37 15.6500 6.76 2.81
ARIZONA DIVIDEND
ADVANTAGE 2 (NKR)
-------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) -- 15.78 15.8500 10.76 8.25
2004 -- 15.10 14.8200 9.46 9.98
2003 (.01) 14.57 14.4000 (3.53) 3.67
2002(b) (.16) 14.88 15.8000 6.81 5.38
ARIZONA DIVIDEND
ADVANTAGE 3 (NXE)
-------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) -- 14.82 14.6800 13.54 8.74
2004 (.01) 14.01 13.3000 1.01 10.25
2003(c) (.21) 13.45 13.9700 (2.76) (2.05)
TEXAS QUALITY
INCOME (NTX)
-------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) -- 15.69 15.2700 7.99 7.03
2004 -- 15.12 14.5900 5.87 10.51
2003 -- 14.57 14.7100 4.14 2.54
2002 -- 15.14 15.0700 9.29 6.61
2001 -- 15.16 14.7300 21.16 12.74
2000 -- 14.26 12.9375 (7.93) 1.15
===========================================================================================
Ratios/Supplemental Data
---------------------------------------------------------------------------------------------
Before Credit/Reimbursement After Credit/Reimbursement***
---------------------------- -------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income to Expenses Income to
Net to Average Average to Average Average
Assets Net Assets Net Assets Net Assets Net Assets
Applicable Applicable Applicable Applicable Applicable Portfolio
to Common to Common to Common to Common to Common Turnover
Shares (000) Shares++ Shares++ Shares++ Shares++ Rate
======================================================================================================================
ARIZONA PREMIUM
INCOME (NAZ)
----------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) $ 65,491 1.22%* 5.92%* 1.21%* 5.94%* 9%
2004 62,431 1.22 6.49 1.21 6.50 26
2003 60,547 1.25 6.81 1.24 6.82 17
2002 62,876 1.28 7.45 1.26 7.47 19
2001 64,859 1.28 7.47 1.27 7.48 18
2000 62,287 1.26 7.58 1.25 7.59 33
ARIZONA DIVIDEND
ADVANTAGE (NFZ)
----------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) 24,100 1.31* 5.81* .84* 6.28* 4
2004 23,153 1.30 6.10 .83 6.57 24
2003 22,290 1.35 6.11 .91 6.55 20
2002 22,791 1.41 6.72 .93 7.20 40
2001(a) 22,072 1.43* 5.80* .95* 6.28* 21
ARIZONA DIVIDEND
ADVANTAGE 2 (NKR)
----------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) 38,232 1.26* 5.73* .80* 6.18* 6
2004 36,543 1.27 5.83 .80 6.30 14
2003 35,237 1.27 5.78 .82 6.23 4
2002(b) 35,913 1.19* 4.43* .77* 4.85* 1
ARIZONA DIVIDEND
ADVANTAGE 3 (NXE)
----------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) 45,456 1.24* 5.63* .75* 6.12* 5
2004 42,983 1.25 5.80 .76 6.29 22
2003(c) 41,247 1.19* 5.05* .73* 5.52* 16
TEXAS QUALITY
INCOME (NTX)
----------------------------------------------------------------------------------------------------------------------
Year Ended 7/31:
2005(d) 148,672 1.18* 6.41* 1.16* 6.42* 5
2004 143,233 1.18 6.77 1.18 6.77 16
2003 137,975 1.20 6.93 1.19 6.94 12
2002 143,305 1.23 7.40 1.22 7.42 22
2001 143,127 1.21 7.87 1.19 7.88 24
2000 134,637 1.27 8.18 1.26 8.19 32
======================================================================================================================
Preferred Shares at End of Period
-------------------------------------------
Aggregate Liquidation
Amount and Market Asset
Outstanding Value Coverage
(000) Per Share Per Share
================================================================
ARIZONA PREMIUM
INCOME (NAZ)
----------------------------------------------------------------
Year Ended 7/31:
2005(d) $30,000 $25,000 $79,576
2004 30,000 25,000 77,026
2003 30,000 25,000 75,456
2002 30,000 25,000 77,397
2001 30,000 25,000 79,049
2000 30,000 25,000 76,906
ARIZONA DIVIDEND
ADVANTAGE (NFZ)
----------------------------------------------------------------
Year Ended 7/31:
2005(d) 12,000 25,000 75,208
2004 12,000 25,000 73,235
2003 12,000 25,000 71,438
2002 12,000 25,000 72,480
2001(a) 12,000 25,000 70,984
ARIZONA DIVIDEND
ADVANTAGE 2 (NKR)
----------------------------------------------------------------
Year Ended 7/31:
2005(d) 18,500 25,000 76,665
2004 18,500 25,000 74,382
2003 18,500 25,000 72,618
2002(b) 18,500 25,000 73,531
ARIZONA DIVIDEND
ADVANTAGE 3 (NXE)
----------------------------------------------------------------
Year Ended 7/31:
2005(d) 22,000 25,000 76,655
2004 22,000 25,000 73,844
2003(c) 22,000 25,000 71,872
TEXAS QUALITY
INCOME (NTX)
----------------------------------------------------------------
Year Ended 7/31:
2005(d) 69,000 25,000 78,867
2004 69,000 25,000 76,896
2003 69,000 25,000 74,991
2002 69,000 25,000 76,922
2001 69,000 25,000 76,858
2000 69,000 25,000 73,782
================================================================
* Annualized.
** Total Investment Return on Market Value is the combination of changes in
the market price per share and the effect of reinvested dividend income and
reinvested capital gains distributions, if any, at the average price paid
per share at the time of reinvestment. Total Return on Common Share Net
Asset Value is the combination of changes in Common Share net asset value,
reinvested dividend income at net asset value and reinvested capital gains
distributions at net asset value, if any. Total returns are not annualized.
*** After custodian fee credit and expense reimbursement, where applicable.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) For the period January 30, 2001 (commencement of operations) through July
31, 2001.
(b) For the period March 25, 2002 (commencement of operations) through July 31,
2002.
(c) For the period September 25, 2002 (commencement of operations) through July
31, 2003.
(d) For the six months ended January 31, 2005.
48-49
See accompanying notes to financial statements.
Reinvest Automatically
EASILY AND CONVENIENTLY
Sidebar text: NUVEEN MAKES REINVESTING EASY. A PHONE CALL IS ALL IT TAKES TO SET
UP YOUR REINVESTMENT ACCOUNT.
NUVEEN CLOSED-END EXCHANGE-TRADED FUNDS
DIVIDEND REINVESTMENT PLAN
Your Nuveen Closed-End Exchange-Traded Fund allows you to conveniently reinvest
dividends and/or capital gains distributions in additional fund shares.
By choosing to reinvest, you'll be able to invest money regularly and
automatically, and watch your investment grow through the power of tax-free
compounding. Just like dividends or distributions in cash, there may be times
when income or capital gains taxes may be payable on dividends or distributions
that are reinvested.
It is important to note that an automatic reinvestment plan does not ensure a
profit, nor does it protect you against loss in a declining market.
EASY AND CONVENIENT
To make recordkeeping easy and convenient, each month you'll receive a statement
showing your total dividends and distributions, the date of investment, the
shares acquired and the price per share, and the total number of shares you own.
HOW SHARES ARE PURCHASED
The shares you acquire by reinvesting will either be purchased on the open
market or newly issued by the Fund. If the shares are trading at or above net
asset value at the time of valuation, the Fund will issue new shares at the
then-current market price. If the shares are trading at less than net asset
value, shares for your account will be purchased on the open market. Dividends
and distributions received to purchase shares in the open market will normally
be invested shortly after the dividend payment date. No interest will be paid on
dividends and distributions awaiting reinvestment. Because the market price of
the shares may increase before purchases are completed, the average purchase
price per share may exceed the market price at the time of valuation, resulting
in the acquisition of fewer shares than if the dividend or distribution had been
paid in shares issued by the Fund. A pro rata portion of any applicable
brokerage commissions on open market purchases will be paid by Plan
participants. These commissions usually will be lower than those charged on
individual transactions.
FLEXIBLE
You may change your distribution option or withdraw from the Plan at any time,
should your needs or situation change. Should you withdraw, you can receive a
certificate for all whole shares credited to your reinvestment account and cash
payment for fractional shares, or cash payment for all reinvestment account
shares, less brokerage commissions and a $2.50 service fee.
You can reinvest whether your shares are registered in your name, or in the name
of a brokerage firm, bank, or other nominee. Ask your investment advisor if his
or her firm will participate on your behalf. Participants whose shares are
registered in the name of one firm may not be able to transfer the shares to
another firm and continue to participate in the Plan.
The Fund reserves the right to amend or terminate the Plan at any time. Although
the Fund reserves the right to amend the Plan to include a service charge
payable by the participants, there is no direct service charge to participants
in the Plan at this time.
CALL TODAY TO START REINVESTING DIVIDENDS AND/OR DISTRIBUTIONS
For more information on the Nuveen Automatic Reinvestment Plan or to enroll in
or withdraw from the Plan, speak with your financial advisor or call us at (800)
257-8787.
50
Other Useful
INFORMATION
Effective Jan. 1, 2005, the asset management services and operations of Nuveen
Advisory Corp. (NAC) and Nuveen Institutional Advisory Corp (NIAC) became part
of Nuveen Asset Management (NAM). This internal consolidation is intended to
simplify the delivery of services to the investment management clients of Nuveen
Investments. It does not affect the investment objectives or portfolio
management of any Fund.
QUARTERLY PORTFOLIO OF INVESTMENTS AND PROXY VOTING
Each Fund's (i) quarterly portfolio of investments, (ii) information regarding
how the Funds voted proxies relating to portfolio securities held during the
most recent 12-month period ended June 30, 2004, and (iii) a description of the
policies and procedures that the Funds used to determine how to vote proxies
relating to portfolio securities are available without charge, upon request, by
calling Nuveen Investments toll-free at (800) 257-8787 or on Nuveen's website at
www.nuveen.com.
You may also obtain this and other Fund information directly from the Securities
and Exchange Commission ("SEC"). The SEC may charge a copying fee for this
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090
for room hours and operation. You may also request Fund information by sending
an e-mail request to publicinfo@sec.gov or by writing to the SEC's Public
Reference Section at 450 Fifth Street NW, Washington, D.C. 20549.
GLOSSARY OF TERMS USED IN THIS REPORT
AVERAGE ANNUAL TOTAL RETURN: This is a commonly used method to express an
investment's performance over a particular, usually multi-year time period. It
expresses the return that would have been necessary each year to equal the
investment's actual cumulative performance (including change in NAV or market
price and reinvested dividends and capital gains distributions, if any) over the
time period being considered.
AVERAGE EFFECTIVE MATURITY: The average of all the maturities of the bonds in a
Fund's portfolio, computed by weighting each maturity date (the date the
security comes due) by the market value of the security. This figure does not
account for the likelihood of prepayments or the exercise of call provisions.
LEVERAGE-ADJUSTED DURATION: Duration is a measure of the sensitivity of a bond
or bond Fund's value to changes when interest rates change. Generally, the
longer a bond or Fund's duration, the more the price of the bond or Fund will
change as interest rates change. Leverage-adjusted duration takes into account
the leveraging process for a Fund and therefore is longer than the duration of
the Fund's portfolio of bonds.
MARKET YIELD (ALSO KNOWN AS DIVIDEND YIELD OR CURRENT YIELD): An investment's
current annualized dividend divided by its current market price.
NET ASSET VALUE (NAV): A Fund's common share NAV per share is calculated by
subtracting the liabilities of the Fund (including any MuniPreferred shares
issued in order to leverage the Fund) from its total assets and then dividing
the remainder by the number of shares outstanding. Fund NAVs are calculated at
the end of each business day.
TAXABLE-EQUIVALENT YIELD: The yield necessary from a fully taxable investment to
equal, on an after-tax basis, the yield of a municipal bond investment.
BOARD OF DIRECTORS/TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Jack B. Evans
William C. Hunter
David J. Kundert
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Eugene S. Sunshine
FUND MANAGER
Nuveen Asset Management
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN
State Street Bank & Trust
Boston, MA
TRANSFER AGENT AND SHAREHOLDER SERVICES
State Street Bank & Trust
Nuveen Funds
P.O. Box 43071
Providence, RI 02940-3071
(800) 257-8787
LEGAL COUNSEL
Chapman and Cutler LLP
Chicago, IL
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
Chicago, IL
Each Fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the period covered by this report. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
52
Nuveen Investments:
SERVING Investors
For GENERATIONS
Photo of: 2 women looking at a photo album.
Since 1898, financial advisors and their clients have relied on Nuveen
Investments to provide dependable investment solutions. For the past century,
Nuveen Investments has adhered to the belief that the best approach to investing
is to apply conservative risk-management principles to help minimize volatility.
Building on this tradition, we today offer a range of high quality equity and
fixed-income solutions that are integral to a well-diversified core portfolio.
Our clients have come to appreciate this diversity, as well as our continued
adherence to proven, long-term investing principles.
WE OFFER MANY DIFFERENT INVESTING SOLUTIONS FOR OUR CLIENTS' DIFFERENT NEEDS.
Managing more than $115 billion in assets, Nuveen Investments offers access to a
number of different asset classes and investing solutions through a variety of
products. Nuveen Investments markets its capabilities under four distinct
brands: Nuveen, a leader in fixed-income investments; NWQ, a leader in
value-style equities; Rittenhouse, a leader in growth-style equities; and
Symphony, a leading institutional manager of market-neutral alternative
investment portfolios.
FIND OUT HOW WE CAN HELP YOU REACH YOUR FINANCIAL GOALS.
To learn more about the products and services Nuveen Investments offers, talk to
your financial advisor, or call us at (800) 257-8787. Please read the
information provided carefully before you invest.
Be sure to obtain a prospectus, where applicable. Investors should consider the
investment objective and policies, risk considerations, charges and expenses of
the Fund carefully before investing. The prospectus contains this and other
information relevant to an investment in the Fund. For a prospectus, please
contact your securities representative or Nuveen Investments, 333 W. Wacker Dr.,
Chicago, IL 60606. Please read the prospectus carefully before you invest or
send money.
o Share prices
Learn more o Fund details
about Nuveen Funds at o Daily financial news
WWW.NUVEEN.COM/ETF o Investor education
o Interactive planning tools
Logo: NUVEEN Investments
ESA-A-0105D
ITEM 2. CODE OF ETHICS.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this filing.
ITEM 6. SCHEDULE OF INVESTMENTS.
See Schedule I in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's Board implemented after the registrant
last provided disclosure in response to this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")(17 CFR
240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable to
this filing.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the 1940 Act (17 CFR 270.30a-2(a)) in the exact form set forth below: Ex-99.CERT
attached hereto.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the 1940 Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons: Not applicable.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the 1940 Act (17 CFR
270.30a-2(b)); Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. 1350) as an exhibit. A certification furnished
pursuant to this paragraph will not be deemed "filed" for purposes of Section 18
of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of
that section. Such certification will not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933 or the Exchange Act,
except to the extent that the registrant specifically incorporates it by
reference. Ex-99.906 CERT attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Nuveen Arizona Dividend Advantage Municipal Fund 3
-----------------------------------------------------------
By (Signature and Title)* /s/ Jessica R. Droeger
----------------------------------------------
Jessica R. Droeger
Vice President and Secretary
Date: April 8, 2005
-------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Gifford R. Zimmerman
----------------------------------------------
Gifford R. Zimmerman
Chief Administrative Officer
(principal executive officer)
Date: April 8, 2005
-------------------------------------------------------------------
By (Signature and Title)* /s/ Stephen D. Foy
----------------------------------------------
Stephen D. Foy
Vice President and Controller
(principal financial officer)
Date: April 8, 2005
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.